Rule 121 sets the mutual agreement procedure: a resident applies in Form No. 55 to the competent authority of India, who aims to resolve the dispute with the other country in an average of twenty-four months, with the assessee's one-month acceptance, withdrawal of appeals, and the Assessing Officer giving effect within a month.
121
Rules 2026 · 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
Rules 77-130
Invoking it (sub-rules 1 to 3). A resident aggrieved by an action of the tax authorities of another country or territory that he considers contrary to the agreement may apply to the competent authority of India in Form No. 55, if the agreement provides for the procedure. On a reference from a foreign competent authority, India's competent authority communicates its acceptance or non-acceptance. It may call for records and documents from the authorities, the assessee or the representative, or discuss the issues with them.
Resolution (sub-rules 4 to 6). The competent authority endeavours to reach a mutually agreeable resolution within an average time of twenty-four months. Where the procedure was invoked because of an action by an Indian authority, the resolution in a tax year cannot decrease the assessee's income or increase the loss in India as declared in the return for that year. A resolution is communicated in writing to the assessee.
Accepting and giving effect (sub-rules 7 to 13). The assessee communicates acceptance or non-acceptance in writing within one month from the end of the month in which the resolution was communicated, and an acceptance comes with proof of withdrawal of any pending appeal on the issues. The competent authority passes the resolution and the acceptance to the Principal Chief Commissioner or Chief Commissioner, who forwards them to the Assessing Officer. The Assessing Officer gives effect by written order within one month from the end of the month of receiving the communication and tells the assessee the tax payable, if any. The assessee pays within the time allowed and submits proof, whereupon the Assessing Officer withdraws any department appeal on the subject. Tax, interest and penalty already determined are adjusted in line with the resolution.
Definition (sub-rule 14). The "competent authority of India" is an officer authorised by the Central Government for this rule.