Section 95 – Applicability of GAAR to be effective from A.Y.2018-19 – Protection from applicability of GAAR should not be restricted to only investments, but may extend to all transactions upto 31.03.2017
Section 95 was amended via the Finance Act, 2015 to provide that provisions of Chapter X-A relating to General Anti-Avoidance Rule (GAAR) are made applicable from A.Y. 2018-19. In effect, the applicability of GAAR is deferred by two years. In this regard, the following further amendments are required:
(a) As per the Explanatory Memorandum to the Finance Bill, 2015, investments made up to 31.03.2017 are to be protected from the applicability of GAAR by amendment in the relevant rules in this regard. Accordingly, Rule 10U has been appropriately amended, and all investments made before 1.4.2017 are protected from the applicability of GAAR. However, all transactions entered before 01.04.2017, and not only investments made, need to be protected from the applicability of GAAR, so as to further improve the investment climate in the country
(b) Further, the applicability of section 144BA providing for reference to Principal Commissioner or Commissioner to declare an arrangement as an impermissible avoidance arrangement in order to determine the consequence of such an arrangement within the meaning of Chapter X-A, also needs to be consequently deferred by two years and made applicable from A.Y.2018-19.
It is suggested that:
(a) All transactions entered into before 01.04.2017 be provided protection from applicability of GAAR, so as to further improve the investment climate in the country.
(b) Section 144BA, providing for reference to Principal Commissioner or Commissioner in certain cases, be consequently deferred by two years and made applicable with effect from A.Y.2018-19.