Rule 121 - Application to give effect to an agreement under section 533(2)(p)

Application seeking to give effect to terms of any agreement under section 533(2)(p) and procedure for giving effect to decision under agreement. 121. (1) Where an assessee, who is a resident of India, is aggrieved by any action of the tax authorities of any country or specified territory outside India which, according to him, is not in accordance with the terms of an agreement with such other country or specified territory, he may make an application to the competent authority of India seeking to invoke the mutual agreement procedure, if provided in such agreement, in Form No. 55. (2) Where a reference has been received from the competent authority of any country or specified territory outside India under any agreement with that country or specified territory with regard to any action taken by any income-tax authority in India or by the tax authorities of such country or specified territory, the competent authority of India shall communicate its acceptance or non-acceptance for taking up the reference under mutual agreement procedure to the competent authority of the other country or specified territory. (3) The competent authority of India shall, on issues contained in Form No. 55 or in the reference from the competent authority of a country or specified territory outside India— (a) call for the relevant records and additional document from the income-tax authorities or the assessee or his authorised representative in India; or (b) have a discussion with such authorities or assessee or representative, to understand the actions taken by the income-tax authorities in India or outside that are not in accordance with the terms of the agreements between India and the other country or specified territory. (4) The competent authority of India shall endeavour to arrive at a mutually agreeable resolution of the tax disputes, arising from such actions of the income-tax authorities, in accordance with the agreement between India and the other country or specified territory within an average time period of twenty-four months. (5) In case the mutual agreement procedure is invoked on account of action taken by any income-tax authority in India, the resolution arrived at under sub-rule (4) in a tax year shall not result in decreasing the income or increasing the loss, as the case may be, of the assessee in India, as declared by him in the return of income of the said year. (6) If a resolution is arrived at under sub-rule (4) between the competent authority of India and that of the other country or specified territory, the same shall be communicated in writing to the assessee. (7) The assessee shall communicate his acceptance or non-acceptance of the resolution in writing to the competent authority of India within one month from the end of the month in which communication has been received under sub-rule (6). (8) The acceptance of the resolution by the assessee shall be accompanied by proof of withdrawal of appeal, if any, pending on the issues that were the subject matter of the resolution arrived at under sub-rule (4). (9) On receipt of acceptance under sub-rule (7), the competent authority of India shall communicate the resolution arrived at under sub-rule (4) and the acceptance by the assessee along with proof of withdrawal of appeal, if any, submitted by the assessee under sub-rule (8), to the Principal Chief Commissioner or the Chief Commissioner, as the case may be, who in turn shall forward it to the Assessing Officer. (10) On receipt of communication under sub-rule (9), the Assessing Officer shall give effect to the resolution arrived at under sub-rule (4), by an order in writing, within one month from the end of the month in which the communication was received by him, and intimate the assessee about the tax payable determined by him, if any. (11) The assessee shall pay the tax as determined under sub-rule (10) within the time allowed by the Assessing Officer and shall submit the proof of payment of taxes to the Assessing Officer, who shall then proceed to withdraw the pending appeal, if any, pertaining to the subject matter of the resolution under sub-rule (4), which was filed by the Assessing Officer or the Principal Commissioner or Commissioner or any other income-tax authority. (12) A copy of the order under sub-rule (10) shall be sent to the competent authority of India and to the assessee. (13) The amount of tax, interest or penalty already determined shall be adjusted in accordance with the resolution arrived at under sub-rule (4) and in the manner provided under the Act or the rules made thereunder, to the extent that such manner is not contrary to the resolution arrived at. (14) For the purposes of this rule, "competent authority of India" means an officer authorised by the Central Government for the purposes of discharging the functions as provided under this rule.