Mutual Agreement Procedure (MAP) In India: Withholding Defaults, Appeals And Treaty Disputes

Two questions about the Mutual Agreement Procedure decide more outcomes than any other: what happens when the Indian payer, rather than the foreign recipient, is the one held liable, and whether to run MAP or an Indian appeal. This note answers those first, then the procedural questions. From 1 April 2026 the Income-tax Act, 2025 and the Income-tax Rules, 2026 govern the procedure, so the familiar references to Rule 44G and Form 34F now point to Rule 121 and Form 55. The firm sets out the position in full in its analysis of the Mutual Agreement Procedure in India.

The Indian payer has been held in default on withholding. Can the non-resident use MAP?

Yes, but not immediately. Where the Indian payer is treated as an assessee in default for failing to deduct tax on a payment to a non-resident, the CBDT’s MAP Guidance states that MAP access will be provided to the non-resident anticipating double taxation or taxation not in accordance with the treaty. The Guidance then adds a timing rule: because that action is purely under domestic law, and the order against the payer is not an order determining any tax on income, the MAP discussion is taken up only after an assessment order is passed in the non-resident’s own case.

The Guidance also deals with money already paid. Tax paid, excluding interest, on a demand raised by the order against the Indian payer may be allowed to be adjusted against the non-resident’s tax liability if MAP resolves the dispute. That matters commercially, because the payer usually recovers the tax from the recipient under the contract, so the two liabilities are the same money.

The Guidance refers to Section 201 of the Income-tax Act, 1961. Its counterpart is Section 398 of the Income-tax Act, 2025, and the certificate that relieves the payer is now Form No. 149. In the author’s view, the same treatment applies to orders under Section 398 unless the Guidance is revised. A non-resident in this position should file its MAP request within the treaty time limit, while expecting the substantive discussion to follow its own assessment. Most of these disputes begin with the withholding tax rules for payments to non-residents.

MAP or an Indian appeal: which route, and can both run?

Both can run. The Guidance records that India follows a liberal regime in which a taxpayer may pursue an appeal and MAP simultaneously. That choice carries three consequences.

• Domestic deadlines keep running. Objections before the Dispute Resolution Panel and appeals must be filed on time whatever the stage MAP has reached. Waiting for MAP forfeits the domestic remedy.
• An Income Tax Appellate Tribunal order decided on the merits closes the negotiation. The Guidance states that the competent authorities in India shall not deviate from the Tribunal’s order for that year. Running the appeal to judgment therefore removes the room the competent authorities had.
• A MAP resolution has to be accepted. The taxpayer has 30 days from the communication to accept it and to produce evidence that the domestic appeals on those issues have been withdrawn.

The two routes also deliver different things, which is why the choice is not only about speed.

In the author’s view, the sequence that usually works is to file both, keep the appeal alive but unheard on the merits, and let the competent authorities negotiate while the domestic clock is protected.

Who applies, and to which competent authority?

The answer depends on which country took the action complained of.

Form No. 55 under Rule 121 of the Income-tax Rules, 2026, formerly Form 34F under Rule 44G, is for an assessee resident in India who is aggrieved by the action of a tax authority outside India. The application goes to the competent authority of India.

A non-resident aggrieved by Indian tax action does not file Form No. 55. India’s treaties require a taxpayer to approach the competent authority of its own country of residence, which then takes the case up with India. A foreign company therefore starts at home, not in Delhi. Where a foreign associated enterprise files with its own competent authority, a copy of the application should also reach the competent authority of India.

What is the time limit?

Most of India’s treaties allow three years from the first notification of the action giving rise to taxation not in accordance with the treaty, as the MAP Guidance records. Some treaties differ, and the Multilateral Instrument may have modified the article in a particular treaty, so the treaty has to be read as it currently applies.

In the author’s view, the prudent course is to treat the earliest formal document asserting the treaty-inconsistent position, such as a draft or final assessment order, as starting the period, and to file well inside it.

What will MAP not do?

• It does not guarantee a result. India commits to endeavour to resolve MAP cases within an average of 24 months. If the competent authorities do not agree, the procedure ends there, unless the treaty in question itself provides for arbitration.
• It does not negotiate interest and penalties. The Guidance states that the competent authorities have no mandate to negotiate these consequential issues, which are administered under domestic law. Interest and penalties linked to the quantum of income do vary in the same proportion as the income once MAP resolves the dispute.
• It is not always available. Access can be refused for a late application, an objection that is not justified, an incomplete application, an advance ruling covering the same issues, a Tribunal order on the same dispute for the same year, or where the taxpayer has itself opted for a settlement scheme on that issue and given up its right of access.

Does MAP help where treaty entitlement itself is challenged?

The question sharpened with The Authority for Advance Rulings v Tiger Global International II Holdings, 2026 INSC 60, Civil Appeals Nos. 262 to 264 of 2026, decided on 15 January 2026, where the Supreme Court held that a tax residency certificate does not foreclose an inquiry into actual control and management, and that the general anti-avoidance rule can apply even where a treaty is more beneficial. The Income-tax Act, 2025 carries that override in Section 159(6), under which Chapter XI applies even if it is not beneficial to the assessee, while Section 159(8) makes a non-resident’s relief conditional on a residence certificate and on the information prescribed in Form No. 41.

One part of the judgment has since been overtaken. On 31 March 2026 the Central Board of Direct Taxes amended the grandfathering provisions by two notifications: Notification No. 54/2026, G.S.R. 240(E), amending Rule 10U of the Income-tax Rules, 1962, and Notification No. 55/2026, G.S.R. 241(E), amending Rule 128 of the Income-tax Rules, 2026 with effect from 1 April 2026. Both put income from the transfer of investments made before 1 April 2017 outside the anti-avoidance provisions. In the author’s view, there is a reasonable argument that the amendments are clarificatory rather than substantive, and so available to taxpayers whose proceedings are still pending; concluded cases stand differently.

What survives is the part that matters to a treaty claim: the residence certificate is now necessary rather than sufficient, and the enquiry runs at the level of the arrangement from the moment it was put in place. In the author’s view, MAP remains worth invoking, but only where a genuine distinction can be shown, and three do the work. First, where the applicable treaty contains a principal purpose test or a limitation of benefits clause that covers the arrangement and the taxpayer genuinely satisfies it, the argument is that the treaty’s own anti-abuse standard is the agreed bilateral test and falls to be applied first, so that the domestic rule has no occasion to operate. Tiger Global did not decide that question, because no such clause applied on its facts. Second, a substance profile materially different from the one before the Court, where board decisions are genuinely taken in the treaty jurisdiction rather than elsewhere. Third, correlative relief in the other country, which no Indian forum can give. Where none of the three is present, a negotiated reversal of India’s position should not be assumed.

The timing point is the one most often missed. In the author’s view, a refusal of a nil or lower deduction certificate, or a certificate issued at a rate inconsistent with the treaty, can itself amount to taxation not in accordance with the treaty, and the non-resident’s own competent authority can be approached at that stage rather than after an assessment. Where a draft order is passed on an eligible assessee, Section 275(2) of the Income-tax Act, 2025 allows 30 days to accept the variations or to object to the Dispute Resolution Panel, and that window is not extended by a pending MAP. Objections and MAP run in parallel, and filing one does not require giving up the other. How entitlement is documented at the outset usually decides which of these situations a business ends up in, and that belongs to international tax planning rather than to dispute management.

Old and new references at a glance

What should a business do first?

Sequence matters more than speed. Identify the treaty and read its MAP article as it currently applies. Fix the date that starts the limitation period. Protect every domestic deadline. Only then decide whether MAP, the domestic route or both will carry the dispute. In the author’s view, the application itself deserves the most care, because it is the record the competent authority takes into the negotiation.

Related Services

International Taxation and Cross-Border Tax Planning: treaty analysis, cross-border structuring and international tax disputes.

Mutual Agreement Procedure (MAP) in India: treaty-based resolution of cross-border tax disputes, for Indian residents and for non-residents on the India side.

Withholding Tax on Payments to Non-Residents: withholding rates, treaty documentation, lower deduction certificates and default proceedings.

Key Sources

CBDT, Mutual Agreement Procedure (MAP) Guidance 2022, F. No. 500/09/2016-APA-I

Income-tax Act, 2025, Section 159 (agreements with foreign countries and relief from double taxation)

Income Tax Department, forms under the Income-tax Rules, 2026 (Form No. 55, Form No. 41, Form No. 149)

The Authority for Advance Rulings v Tiger Global International II Holdings, 2026 INSC 60, Supreme Court of India, 15 January 2026 (judgment as reported by the Supreme Court)

CBDT Notification No. 54/2026, G.S.R. 240(E), 31 March 2026 (Rule 10U, Income-tax Rules, 1962)

CBDT Notification No. 55/2026, G.S.R. 241(E), 31 March 2026 (Rule 128, Income-tax Rules, 2026)

Income-tax Act, 2025, Section 275 (draft order and objections before the Dispute Resolution Panel)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.