Rule 122: Bilateral and multilateral APA negotiation procedure
Rule 122 governs the competent-authority process for bilateral and multilateral APA requests made in Form 51. It requires an overseas APA process by the associated enterprise and distinguishes authority-to-authority negotiations from the applicant’s own communications.
Official notified Income-tax Rules, 2026Need advice on Rule 122?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
On this page
Bare law
Rule 122 - Procedure to deal with requests for bilateral or multilateral advance pricing agreements
(1) Where a person has made request for a bilateral or multilateral advance pricing agreement in an application filed in Form No. 51 in accordance with rule 106, the request shall be dealt with subject to provisions of this rule.
(2) The process for bilateral or multilateral advance pricing agreement shall commence only if the associated enterprise located outside India has initiated process of advance pricing agreement with the competent authority of the other country.
(3) On intimation of request of the applicant for a bilateral or multilateral agreement, the competent authority of India shall consult and ascertain willingness of the competent authority of other country or countries, as the case may be, for initiation of negotiation for this purpose.
(4) In case of willingness of the competent authority of other country or countries, as the case may be, the competent authority of India shall enter into negotiation in this behalf and endeavour to reach mutually acceptable terms with the competent authority of the other country or countries, as the case may be.
(5) Upon reaching an agreement after consultation, the competent authority of India shall formalise a mutual agreement procedure arrangement with the competent authority of other country or countries, as the case may be, and intimate the same to the applicant.
(6) In case of failure to reach agreement on mutually acceptable terms as mentioned in sub-rule (4), the applicant shall be informed of the same.
(7) The applicant shall not be entitled to be part of discussion between competent authority of India and the competent authority of the other country or countries, as the case may be, but the applicant may communicate or meet the competent authority of India for the purpose of entering into an advance pricing agreement.
(8) The applicant shall convey acceptance or otherwise of the agreement within one month from the end of the month in which communication has been received.
(9) If the applicant does not accept the agreement, it may, –– (a) continue the advance pricing agreement process without the benefit of the mutual agreement procedure; or (b) withdraw the application in accordance with rule 107.
Rule breakdown
The overseas process is a prerequisite
The bilateral or multilateral process starts only if the associated enterprise outside India has initiated its APA process with the other country’s competent authority.
Coordinate the Indian and overseas applications and retain evidence of the foreign initiation.
Authorities establish willingness and negotiate
India’s competent authority checks the other authority’s willingness and, if willing, negotiates to reach mutually acceptable terms. An agreed arrangement is formalised and communicated to the applicant.
If mutually acceptable terms are not reached, the applicant is informed. A request itself does not guarantee agreement between authorities.
The applicant does not join inter-authority discussions
The applicant is not entitled to participate in discussions between the competent authorities. It may, however, communicate or meet India’s competent authority for the APA purpose.
Prepare clear factual submissions and answer questions through the permitted channels rather than assuming a seat in the negotiations.
Respond within one month from receipt-month end
The applicant conveys acceptance or otherwise within one month from the end of the month in which the communication is received.
Record actual receipt and obtain an informed decision on the terms before the response deadline.
If the terms are not accepted
The applicant may continue the APA process without the benefit of the mutual agreement procedure or withdraw under Rule 107.
Assess the cross-border implications and the withdrawal fee consequences before selecting either route.
Key takeaways
Foreign initiation required
Coordinate the associated enterprise’s overseas process.
Separate negotiation roles
The applicant may communicate with India’s authority but does not join inter-authority talks.
Timed acceptance
The response period is measured from receipt-month end.
Practical checklist
- Coordinate the overseas initiation.
- Maintain factual submissions and receipt evidence.
- Review both alternatives before rejecting negotiated terms.
Avoid
- Do not assume filing guarantees mutual agreement.
- Do not miss the month-end response clock.
FAQs
Can the bilateral process start without the foreign associated enterprise initiating an APA?
Sub-rule (2) says it commences only if that overseas process has been initiated.
Can the applicant attend the authorities’ negotiation?
It is not entitled to be part of those discussions, but may communicate or meet India’s competent authority.
What if the applicant rejects the terms?
It may continue without the MAP benefit or withdraw under Rule 107.
Glossary
- Bilateral or multilateral process
- The competent-authority procedure supporting the requested APA across the relevant jurisdictions.