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Rule 121Published

Rule 121: Treaty MAP application and implementation

Rule 121 governs the treaty mutual agreement procedure request and implementation process. It covers the resident’s Form 55 application, competent-authority work, acceptance of a resolution, appeal withdrawals and the order giving effect to the result.

Official notified Income-tax Rules, 2026

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Rule 121 - Application seeking to give effect to terms of any agreement under section 533(2)(p) and procedure for giving effect to decision under agreement

(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 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 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, the ―competent authority of India‖ means an officer authorised by the Central Government for the purposes of discharging the functions as provided under this rule.

Rule breakdown

Form 55 and the treaty basis

A resident of India aggrieved by a foreign tax-authority action considered inconsistent with the treaty may apply to India’s competent authority in Form 55, if MAP is provided in that agreement.

Identify the treaty, issue, action and relevant treaty time requirements. The rule should not be read as creating MAP rights where the agreement does not provide them.

Provide records for the competent-authority review

The competent authority may obtain records and additional documents and discuss the case with tax authorities, the assessee or the authorised representative. Foreign-authority references are separately accepted or declined for MAP consideration.

Keep tax orders, transaction evidence, computations and the treaty argument consistent across jurisdictions.

The twenty-four-month wording is an endeavour

The authority endeavours to reach a mutually agreeable resolution within an average period of twenty-four months. This is not an unconditional guarantee of resolution by an individual case deadline.

Where MAP is invoked because of Indian tax-authority action, the specified resolution must not decrease the income or increase the loss declared by the assessee in India in that tax year’s return.

Accept or reject within the stated month-end period

The resolution is communicated in writing. The assessee responds in writing within one month from the end of the month in which that communication is received.

Acceptance must include proof of withdrawal of any pending appeal on the issues resolved. Identify the covered issues precisely rather than treating unrelated appeal grounds as automatically resolved.

Implementation and payment

After the accepted resolution and withdrawal proof reach the AO through the stated channel, the AO issues the giving-effect order within one month from the end of the receipt month and communicates any tax payable.

Pay within the period the AO allows and submit payment proof. The rule then provides for withdrawal of the relevant pending departmental appeal on the resolution’s subject matter.

Reconcile tax, interest and penalty

Existing tax, interest or penalty is adjusted in accordance with the resolution using the Act and Rules to the extent their manner is not contrary to the resolution.

Retain the resolution, acceptance, appeal withdrawals, giving-effect order and payment record as one implementation file.

Key takeaways

Treaty right must exist

Form 55 operates within the relevant agreement.

Response deadline is month-end based

Track written receipt of the resolution.

Covered appeals require action

Acceptance and implementation involve specified withdrawals.

Twenty-four months is an average endeavour

Do not present it as guaranteed relief.

Practical checklist

  • Identify the treaty basis and relevant time requirements.
  • Keep consistent records across jurisdictions.
  • Track acceptance, appeal withdrawal and payment steps.

Avoid

  • Do not treat the average endeavour as a guaranteed case deadline.
  • Do not overlook implementation after accepting the resolution.

FAQs

Is every MAP case guaranteed to finish within twenty-four months?

The rule says the authority shall endeavour to resolve disputes within an average period of twenty-four months.

When must the assessee respond to the resolution?

Within one month from the end of the month of receiving its written communication.

What accompanies acceptance?

Proof of withdrawal of any pending appeal on the issues that were the resolution’s subject matter.

Glossary

Giving-effect order
The AO’s written order implementing the accepted resolution under sub-rule (10).

Official sources