Facts of the Case

  • The assessee, Convergys Customer Management Group Inc., had instituted multiple appeals before the Delhi High Court concerning international taxation disputes for several assessment years.
  • During the pendency of these appeals, the Competent Authority of India under the Central Board of Direct Taxes (CBDT) issued an order of resolution under the Mutual Agreement Procedure (MAP).
  • The resolution was issued under Section 90 of the Income Tax Act, 1961 read with Article 27 of the India-USA Double Taxation Avoidance Convention.
  • The assessee accepted the resolution and conveyed its consent for withdrawal of pending appeals before the High Court and ITAT.
  • The Revenue also informed the Court that several departmental appeals arising from the same dispute would also be withdrawn.

Issues Involved

  1. Whether tax disputes pending before the High Court could be withdrawn upon settlement under Mutual Agreement Procedure (MAP) under the Indo-US DTAA?
  2. Whether the Revenue’s connected appeals arising out of the same subject matter should also be permitted to be withdrawn after implementation of MAP resolution?
  3. Scope and effect of Section 90 of the Income Tax Act in giving effect to international tax treaty dispute resolutions.

Petitioner’s Arguments

  • The appellant submitted that the tax disputes had been resolved through the Mutual Agreement Procedure under the Indo-US DTAA.
  • The assessee had formally accepted the resolution communicated by the Competent Authority.
  • In light of the settlement, continuation of the appeals had become unnecessary.
  • Accordingly, permission was sought for withdrawal of all pending appeals.

Respondent’s Arguments

  • The Revenue acknowledged the resolution under the Mutual Agreement Procedure.
  • It was submitted that the same settlement covered several connected appeals filed by the Department as well.
  • The Revenue placed on record the official communication received from the DCIT, International Taxation Circle, confirming the resolution.
  • The Revenue sought permission for withdrawal of its connected appeals as well.

Court Findings / Observations

  • The Delhi High Court took note of the settlement achieved under the Mutual Agreement Procedure.
  • The Court acknowledged that the assessee had accepted the resolution and had agreed to withdraw pending litigation.
  • The Court also recorded the Revenue’s statement that related departmental appeals were covered by the same agreement and were liable to be withdrawn.
  • The Court found no impediment in permitting withdrawal of the appeals.

Court Order / Final Decision

The Delhi High Court allowed the applications and dismissed the appeals as withdrawn in view of the settlement reached under the Mutual Agreement Procedure under the Indo-US DTAA. The connected departmental appeals were also dismissed as withdrawn.

Important Clarification / Legal Significance

  • Settlement under MAP under a DTAA can effectively conclude pending domestic tax litigation.
  • Section 90 of the Income Tax Act empowers implementation of treaty-based dispute resolution mechanisms.
  • Acceptance of MAP resolution by the assessee has consequential effect on pending appellate proceedings.
  • Both assessee and Revenue may withdraw pending appeals once treaty resolution is implemented.

Sections Involved

  • Section 90, Income Tax Act, 1961
  • Article 27, India-USA Double Taxation Avoidance Agreement (DTAA)

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8711-DB/SRB13032018ITA32014_125651.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.