Deferment of provisions relating to General Anti Avoidance Rule (GAAR)
The existing provisions of the General Anti Avoidance Rule (GAAR) introduced by the Finance Act, 2013 are contained in Chapter X-A (consisting of section 95 to 102) and section 144BA of the Act. Chapter X-A provides the substantive provision of GAAR whereas section 144BA provides the procedure to be undertaken for invoking GAAR and passing of the assessment order in consequence of GAAR provisions being invoked.
As provided in the Act, GAAR provisions are to come into effect from 1.04.2016. These provisions, therefore, shall be applicable to the income of the financial year 2015-16 (Assessment Year 2016-17) and subsequent years.
The implementation of GAAR provisions has been reviewed. Concerns have been expressed regarding certain aspects of GAAR. Further, it has been noted that the Base Erosion and Profit Shifting (BEPS) project under Organisation of Economic Cooperation and Development (OECD) is continuing and India is an active participant in the project. The report on various aspects of BEPS and recommendations regarding the measures to counter it are awaited. It would, therefore, be proper that GAAR provisions are implemented as part of a comprehensive regime to deal with BEPS and aggressive tax avoidance.
Accordingly, it is proposed that implementation of GAAR be deferred by two years and GAAR provisions be made applicable to the income of the financial year 2017-18 (Assessment Year 2018-19) and subsequent years by amendment of the Act. Further, investments made up to 31.03.2017 are proposed to be protected from the applicability of GAAR by amendment in the relevant rules in this regard.
This amendment will take effect from 1st April, 2015.
EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015
25. Amendment of section 95.
Section 95 of the Income-tax Act shall be numbered as sub-section (1) thereof, and after sub-section (1) as so numbered and before the Explanation, the following sub-section shall be inserted, namely:—
“(2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of April, 2018.”.
NOTE ON CLAUSES
Clause 25 of the Bill seeks to amend section 95 of the Income-tax relating to applicability of General Anti Avoidance Rule.
The said section provides that an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of Chapter X-A.
It is proposed to renumber the said section as sub-section (1).
It is also proposed to insert a new sub-section (2) so as to provide that the provisions of Chapter X-A shall apply in respect of any assessment year beginning on or after the 1st day of April, 2018.
This amendment will take effect from 1st April, 2015.
( Compiled by Taxguru Team)
