https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=766000 https://www.taxtmi.com/caselaws?id=766000 TP adjustment relating to Non-US Transactions on the same framework as adopted for determining the TP adjustment in respect of US Transactions - It is the Assessee s case that MAP (Mutual Agreement Procedure) is based on consensus between the competent authorities of the contracting states and the basis for TP adjustments under the MAP cannot be applied to international transactions, which are not subject of negotiations under the MAP. Whether it is apposite to use the framework agreed by competent authorities of the US and India under the MAP in terms of Article 27 of the Indo-US DTAA, for deciding transfer pricing issues that are not covered under the said framework? - HELD THAT:- MAP is a resolution process by competent authorities of contracting states by negotiations and consensus. In a case of a transfer pricing adjustment, an assessee may not be aggrieved by an upward revision if the overall taxation between the assessee and its AE is acceptable to it. A multi-national group may accept a situation where an upward TP adjustment by a taxing authority of one country has a corresponding mitigating effect on the taxable revenue of its constituent entity in the other contracting state. It may do so even though it considers the same to be incorrect as the adverse effect in one jurisdiction may even out in another. However, this would not justify a TP adjustment in respect of transactions which are disputed and not subjected to MAP. MAP procedure is based on an agreement between the competent authorities of the contracting states, which is accepted by the Assessee. The effect of imputing a framework arrived at between competent authorities of India and the US in respect of US Transactions to Non-US Transactions has an effect of imposing a consensual and negotiated settlement regarding one set of transaction to another where there is no such consensus. This in effect seeks to foreclose a right of an assessee to dispute a TP adjustment on the basis of the assessee s acceptance of an agreement in a situation, which is materially different. It is of vital importance to note that there is no agreement between the tax authorities of other Non-US countries regarding the determination of the ALP of Non-US Transactions. Thus, the TP adjustments made on the basis of MAP under the Indo-US DTAA, does not bind the tax authorities of the non-US countries. Resolution under MAP is by consent and negotiations; such resolution cannot be imposed in a contested case where there is no consensus. An agreement arrived at by the competent authorities of two contracting states under MAP cannot substitute the determination of ALP under the Act and the Rules in cases which are not covered under the MAP. The ALP in such cases must necessarily be determined in accordance with Section 92C of the Act and Rule 10B of the Rules. MAP is a specific procedure for addressing issues arising out of DTAA and must necessarily be confined to those issues and the subject transactions. The Agreement under MAP cannot be extrapolated as a determination of ALP of international transactions, which are not subject to MAP, under Section 92C of the Act or Rule 10B of the Rules. Thus, decision of the ITAT to direct the determination of the ALP for Non-US Transactions on the basis of framework as agreed to by the competent authorities under MAP for US Transactions, is not in accordance with law and thus, the said decision cannot be sustained. Decided in favour of the Assessee Case-Laws Income Tax Thu, 06 Feb 2025 00:00:00 +0530