In order to avoid unintended severity for taxpayers during the period of suspension of the application of POPs and for effective management of revenue collection, India has signed a Memorandum of Understanding with some countries on the suspension of tax collection. These include the United States, the United Kingdom, Denmark, Sweden and South Korea. In this regard, the guidelines specify that taxes that may be suspended are taxes that resulted from the litigation being debated in the POP context. With respect to POPs with other countries, Indian national law regulates procedures for suspending tax collection or suspending the application. This is usually the partial or full payment of the tax debt, as issued by the Indian tax authorities. The “secondary adjustments” provisions apply from india`s fiscal year as of April 1, 2016. The main purpose of these provisions is to ensure that the allocation of profits between associated companies is consistent with the main adjustment of the TPs. The above provisions also provide for a regulation of POPs to require an effective cash return for the incremental amount of profits. As a result, the guidelines specify that Indian CAs would be required to make such secondary adjustments in the MAP decision with respect to cases related to the 2016-2017 fiscal year or beyond. Observers noted that India`s statement indicated that the United States could begin to recognize India`s Early Price Agreements (APA) and accept bilateral APP requests.
This indicates that within a few weeks, up to 100 MAP files over several years could be resolved in the information technology sector. In August 2020, the Central Direct Taxes Council (CBDT) issued guidelines for the Mutual Agreement Procedure (MAP), which includes the following four parts: numerous cases of POPs between the United States and India have been filed in recent years due to improved relations between the Domestic Revenue Service and CBDT.