• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/22/2013

India - Assessment deferred under MAP proceedings involving U.S. taxpayer 

November 22:  The Bombay High Court held that when a mutual agreement procedure (MAP) allows for assessment proceedings to be deferred and for tax collection efforts to be suspended for prior years, the tax assessment deferral and collection suspension also may apply to subsequent years, provided the taxpayer furnishes an adequate bond guarantee. UPS Worldwide Forwarding Inc. v. ADIT/DIT

The High Court directed India’s tax department to issue an appropriate “nil" withholding tax certificate for the taxpayer’s subsequent assessment year, provided the taxpayer agreed to maintain the bank guarantee that previously had been provided to secure payment of tax and interest.


The taxpayer (a U.S. express delivery company) entered into an agreement with an Indian company to provide services with respect to the delivery of parcels outside India (parcels originating in India) and with respect to the delivery of parcels to be delivered in India (parcels originating outside India).

The taxpayer received income for services rendered for outbound parcels, and paid amounts with respect to inbound parcels. The taxpayer claimed that the amounts received from overseas customers in respect of parcels being delivered in India was not taxable in India. The Assessing Officer did not agree with this position.

For assessment years (AYs) 2001-02 to 2009-10, the taxpayer filed a MAP application to the U.S. Competent Authority and, pursuant to provisions of the India-United States income tax treaty, claimed that income received from the Indian company was not taxable. Later, the taxpayer made an application to include AY 2010-11 in the MAP proceedings.

The Competent Authorities of India and the United States, being aware of the hardship that the taxpayer faced during the pendency of the MAP proceedings, entered into a memorandum of understanding (MOU), and agreed to defer the tax assessment and suspend collection of tax, provided the taxpayer furnished a bank guarantee securing the tax liability.

The Assessing Officer issued a “nil” withholding certificates for AY 2007-2008 to AY 2009-10, but decided not to grant the certificate for AY 2010-11.

High Court’s decision

The High Court held that the subsequent assessment year was also covered by the original MAP application, provided that the taxpayer undertook to keep the already furnished bank guarantee “alive” and to provide a further bank guarantee if necessary to secure the tax liability adequately.

The case turned on the definition of “admitted”—that is, the Indian Competent Authority must admit (acknowledge) that the MAP proceedings have been invoked by the taxpayer through the U.S. Competent Authority.

Read a November 2013 report [PDF 449 KB] prepared by the KPMG member firm in India: MAP initiated under the India-USA tax treaty for deferment of assessment proceedings and suspension of collection of taxes for past year would also cover subsequent year

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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