Transfer Pricing | Resolution Under Mutual Agreement Procedure Is By Consensus, Cannot Be Imposed Upon Assessee: Delhi HC

The Delhi High Court has made it clear that a dispute with respect to arm's length price in a transfer pricing can be resolved under Mutual Agreement Procedure only by consent and negotiations between contracting parties. Thus, the question before the Court was 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. At the outset, the High Court noted that the issue regarding transfer pricing adjustment may arise where taxing authorities of both the contracting states may tax the same income. Thus MAP is evolved for resolving a dispute regarding double taxation by competent authorities of contracting states, via a consensual procedure, within the framework of the Double Taxation Avoidance Agreements. 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.” Court added, “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.