The competent authorities have settled your case under the mutual agreement procedure and the department still will not give effect to it. What order will the court make?
A mandatory one. The Karnataka High Court declared that the revenue authorities cannot defer implementing or giving effect to a MAP settlement, directed them to amend the assessment orders for all four years in conformity with it, to allow the refund with permissible interest under the prescribed procedure, and to complete the exercise within four months of receipt of a certified copy of the order.
Decided by the High Court (B.M. Shyam Prasad J) on 2022-04-22, reported as W.P. No. 8114 of 2021 (T-IT). It bears on section 90(2), section Rule 44G, section Rule 44G(5), section Rule 44H, section DTAA art 27(2), section DTAA art 28 of the Income Tax Act 1961, in Refunds, Interest & Condonation, Assessment & Scrutiny and How Tax Law Is Read matters.
It is the remedy where the competent authorities have agreed but the assessing officer sits on the outcome. It also decides two points of some reach: that a MAP pending on 6 May 2020 is governed by the amended Rule 44G, Rule 44H having been omitted from that date, and that the bar in Rule 44G(5) on decreasing income applies only where MAP was invoked on account of action taken by an Indian income tax authority, so it does not bite where the foreign authority acted.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner develops software for its holding company in the United States, Symphony Teleca Corporation, later Harman International Industries Inc. It was compensated at 15 per cent on costs until 31 March 2010 and 17.5 per cent from 1 April 2010. In September 2013 the United States Internal Revenue Service began an audit and made transfer pricing adjustments for the years ending December 2010, 2011 and 2012, taking the view that the mark-ups were excessive and that royalty had not been paid. The mutual agreement procedure under the India-United States treaty was invoked and the competent authorities reached a resolution, which the Court found had been arrived at by 6 May 2020 though the letter bears 7 May 2020, communicated to the petitioner on 16 October 2020. The correlative relief was Rs 51,38,13,567 on the software development side and Rs 5,35,95,682 on the royalty side. The department did not implement the settlement, and by email of 27 November 2020 directed the petitioner not to withdraw its appeals. The petitioner sought implementation and refund for assessment years 2010-11 to 2013-14, the department contesting only 2013-14.
The petition was allowed. The Court declared that the respondents cannot defer implementing or giving effect to the MAP settlement, either for assessment years 2010-11 to 2012-13, which were not contested, or for assessment year 2013-14. It directed the respondents to take necessary measures to amend the assessment orders for assessment years 2010-11 to 2013-14 in conformity with the MAP settlement and to allow the refund with permissible interest in accordance with the prescribed procedure, and to complete the exercise within four months from the date of receipt of a certified copy of the order.
The Court began from the change in the rules. Rule 44G was amended and Rule 44H omitted with effect from 6 May 2020, and with that amendment the mutual agreement procedure, whether on a reference by the competent authority of the other country or on an application by an assessee, was unified and made common (para 32). Because the petitioner had complied with the terms on which the resolution was communicated, the only reasonable conclusion was that the Indian authorities, including the Indian competent authority, had dealt with the MAP as proceedings pending as of 6 May 2020, so the amended rule applied (para 34). Rule 44G(5) stipulates that there shall be no decrease in income or increase in loss in the return of a given year where MAP is invoked on account of action taken by an income tax authority in India; the Court held that by converse implication that rigour is excluded where MAP follows action taken by an income tax authority of the other contracting State (para 36), which was this case. It then applied s.90(2), holding it settled law that the terms of a treaty take precedence even over the provisions of the Act where beneficial to an assessee (para 37), and concluded that the petitioner was entitled to seek precedence for the MAP settlement (para 38).
the respondents cannot defer implementing or giving effect to the MAP Settlement
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Handle my notice → Ask a CA on WhatsAppA mandatory one. The Karnataka High Court declared that the revenue authorities cannot defer implementing or giving effect to a MAP settlement, directed them to amend the assessment orders for all four years in conformity with it, to allow the refund with permissible interest under the prescribed procedure, and to complete the exercise within four months of receipt of a certified copy of the order. This was decided by the High Court (B.M. Shyam Prasad J) and bears on section 90(2), section Rule 44G, section Rule 44G(5), section Rule 44H, section DTAA art 27(2), section DTAA art 28 of the Income Tax Act 1961. It is reported as W.P. No. 8114 of 2021 (T-IT). It is the remedy where the competent authorities have agreed but the assessing officer sits on the outcome. It also decides two points of some reach: that a MAP pending on 6 May 2020 is governed by the amended Rule 44G, Rule 44H having been omitted from that date, and that the bar in Rule 44G(5) on decreasing income applies only where MAP was invoked on account of action taken by an Indian income tax authority, so it does not bite where the foreign authority acted. If it applies to you, the first step is this: Date the MAP resolution and check it against 6 May 2020; the amended Rule 44G governs a MAP pending on that date, Rule 44H having been omitted.
The petitioner develops software for its holding company in the United States, Symphony Teleca Corporation, later Harman International Industries Inc. It was compensated at 15 per cent on costs until 31 March 2010 and 17.5 per cent from 1 April 2010. In September 2013 the United States Internal Revenue Service began an audit and made transfer pricing adjustments for the years ending December 2010, 2011 and 2012, taking the view that the mark-ups were excessive and that royalty had not been paid. The mutual agreement procedure under the India-United States treaty was invoked and the competent authorities reached a resolution, which the Court found had been arrived at by 6 May 2020 though the letter bears 7 May 2020, communicated to the petitioner on 16 October 2020. The correlative relief was Rs 51,38,13,567 on the software development side and Rs 5,35,95,682 on the royalty side. The department did not implement the settlement, and by email of 27 November 2020 directed the petitioner not to withdraw its appeals. The petitioner sought implementation and refund for assessment years 2010-11 to 2013-14, the department contesting only 2013-14. The matter was decided on 2022-04-22 by the High Court (B.M. Shyam Prasad J). On those facts the High Court held as follows. The petition was allowed. The Court declared that the respondents cannot defer implementing or giving effect to the MAP settlement, either for assessment years 2010-11 to 2012-13, which were not contested, or for assessment year 2013-14. It directed the respondents to take necessary measures to amend the assessment orders for assessment years 2010-11 to 2013-14 in conformity with the MAP settlement and to allow the refund with permissible interest in accordance with the prescribed procedure, and to complete the exercise within four months from the date of receipt of a certified copy of the order.
The Court began from the change in the rules. Rule 44G was amended and Rule 44H omitted with effect from 6 May 2020, and with that amendment the mutual agreement procedure, whether on a reference by the competent authority of the other country or on an application by an assessee, was unified and made common (para 32). Because the petitioner had complied with the terms on which the resolution was communicated, the only reasonable conclusion was that the Indian authorities, including the Indian competent authority, had dealt with the MAP as proceedings pending as of 6 May 2020, so the amended rule applied (para 34). Rule 44G(5) stipulates that there shall be no decrease in income or increase in loss in the return of a given year where MAP is invoked on account of action taken by an income tax authority in India; the Court held that by converse implication that rigour is excluded where MAP follows action taken by an income tax authority of the other contracting State (para 36), which was this case. It then applied s.90(2), holding it settled law that the terms of a treaty take precedence even over the provisions of the Act where beneficial to an assessee (para 37), and concluded that the petitioner was entitled to seek precedence for the MAP settlement (para 38). In the words reproduced by the source cited on this page: "the respondents cannot defer implementing or giving effect to the MAP Settlement"
It was decided by the High Court on 2022-04-22 and is reported as W.P. No. 8114 of 2021 (T-IT). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 90(2), section Rule 44G, section Rule 44G(5), section Rule 44H, section DTAA art 27(2), section DTAA art 28, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition was allowed. The Court declared that the respondents cannot defer implementing or giving effect to the MAP settlement, either for assessment years 2010-11 to 2012-13, which were not contested, or for assessment year 2013-14. It directed the respondents to take necessary measures to amend the assessment orders for assessment years 2010-11 to 2013-14 in conformity with the MAP settlement and to allow the refund with permissible interest in accordance with the prescribed procedure, and to complete the exercise within four months from the date of receipt of a certified copy of the order. It arises in Refunds, Interest & Condonation, Assessment & Scrutiny and How Tax Law Is Read matters, on section 90(2), section Rule 44G, section Rule 44G(5), section Rule 44H, section DTAA art 27(2), section DTAA art 28 of the Income Tax Act 1961, and was decided by B.M. Shyam Prasad J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Identify which country's tax authority took the action that led to MAP. If it was the foreign authority, Rule 44G(5) does not prevent a decrease in your Indian income. Put on record that you have complied with the terms on which the settlement was communicated, including any requirement to withdraw appeals. If the department is withholding implementation for some years while accepting others, seek the direction for all covered years together, as was done here for 2013-14 alongside 2010-11 to 2012-13. Ask for refund with permissible interest in the same prayer; the direction here covered both, within a fixed period.
Searched for later treatment; none was found. That is not the same as a source affirming it. Decided on 22 April 2022. A search for later decisions applying or doubting it, and for any writ appeal or special leave petition, returned nothing on point; the results were court notifications and unrelated matters. The library holds no other authority on Rule 44G or Rule 44H, so this decision stands alone here and should be checked for subsequent treatment before it is relied on. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full including the operative order, which is set out under a separate 'ORDER' heading after para 38 rather than being numbered. The date on which the MAP resolution was reached was itself in issue: the letter is dated 7 May 2020 but the Court proceeded on the footing that the resolution had been arrived at by 6 May 2020, which matters because the amended Rule 44G took effect on that date. The reasoning at para 36 on Rule 44G(5) is expressed as a converse implication rather than as anything the rule says in terms, and the Court records that it was adopting the argument of Sri S. Ganesh for the petitioner; it is nonetheless the Court's own holding, being the ground on which relief was granted. Only assessment year 2013-14 was contested by the department. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was allowed. The Court declared that the respondents cannot defer implementing or giving effect to the MAP settlement, either for assessment years 2010-11 to 2012-13, which were not contested, or for assessment year 2013-14. It directed the respondents to take necessary measures to amend the assessment orders for assessment years 2010-11 to 2013-14 in conformity with the MAP settlement and to allow the refund with permissible interest in accordance with the prescribed procedure, and to complete the exercise within four months from the date of receipt of a certified copy of the order.
TaxSphere, “Harman Connected Services Corporation India Pvt Ltd v Joint Secretary”, https://taxnotice.vittsphere.com/caselaw/case/harman-connected-services-map-settlement-must-be-implemented-rule-44g/ (validity last checked 2026-09-16)
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You offered extra income to give effect to a MAP resolution. The officer says the proviso denying a Chapter III deduction on enhanced income applies. Does it?
My primary adjustment stands and the money is still with my overseas associated enterprise. When exactly do my ninety days start, and at what rate is the deemed advance to be charged interest?
My transfer pricing dispute has been settled under MAP and I want to withdraw my appeal. The department has its own cross-appeal before the Tribunal. Does that survive?
Your MAP resolution has come through while cross appeals are pending before the Tribunal. What happens to the appeals, and who has to withdraw what?
