PENDING MAP TAX NOT BE COLLECTED

Article 27 of the Indo-USA Double Taxation Avoidance Convention (DTAC) provides for a Mutual Agreement Procedure (MAP) for avoidance of double taxation. To avoid hardship to tax payers, the competent authorities of India and the US had entered into a memorandum of understanding (MoU) regarding suspension of collection during the pendency of MAP in 2003. The collection of outstanding taxes in the case of a resident of the US, whose request under MAP is under consideration  of the competent authorities, was kept in abeyance, subject to furnishing a bank guarantee of an amount equal to the amount of tax under dispute and the interest accruing thereon according to the provisions of the Income Tax Act. It has been decided to extend the applicability of the MoU to Indian entities also during the pendency of the MAP. The MoU was hitherto applicable only to US entities.