Impact of Gaar
A Research Paper on
General Anti-Avoidance Rule (GAAR)
&
Impacts and Implications
As a Term Paper for 1st Quad ester for Post Graduate Program in Financial Markets
Presented by: Mr. Sumit Gupta Enrollment No: NF121329 Email id: sumit.11.gupta@gmail.com
GAAR – Impacts and Implications
Acknowledgement
I would take this opportunity to extend my gratifications to one individual who had faith in me and believed that I could do things beyond what I could ever imagine. He pushed me against all the odds and transformed my thought process of how to approach a problem. He is in all true sense a mentor, facilitator, tutor, coach and guide.
Dr. A M Sherry, our program coordinator, who is always there for the students.
“SUBVERT THE PARADIGM”
Thank you for all your support!!!
Sumit Gupta
Page 2
GAAR – Impacts and Implications
INTRODUCTION
General Anti-Avoidance Rule (GAAR) introduced by the Finance Act,2012 is applied to deny tax treaty benefits to non-residents taxpayers who would otherwise be entitled to them through improper use of treaty provisions. Under Indian GAAR, an arrangement whose main purpose or one of the main purposes is to obtain a tax benefit and which satisfies certain prescribed conditions such as lack of commercial substance, abuse of treaty provisions, etc would qualify as an impermissible avoidance arrangement on which GAAR could be applicable. The tax effect of such impermissible avoidance arrangements is to be determined by the Indian Revenue Authority (‘IRA’) in any manner it sees appropriate, which would include disregarding or combining or recharacterising any step / parties in the arrangement, ignoring the arrangement, re-allocating income and expenses, re-characterising equity as debt and vice versa, re-locating the place of residence of any party or suits of an asset, etc. Tax avoided is considered as tax evaded. GAAR can be made applicable in dealing with potential misuse of treaties and can override the
General Anti-Avoidance Rule (GAAR)
&
Impacts and Implications
As a Term Paper for 1st Quad ester for Post Graduate Program in Financial Markets
Presented by: Mr. Sumit Gupta Enrollment No: NF121329 Email id: sumit.11.gupta@gmail.com
GAAR – Impacts and Implications
Acknowledgement
I would take this opportunity to extend my gratifications to one individual who had faith in me and believed that I could do things beyond what I could ever imagine. He pushed me against all the odds and transformed my thought process of how to approach a problem. He is in all true sense a mentor, facilitator, tutor, coach and guide.
Dr. A M Sherry, our program coordinator, who is always there for the students.
“SUBVERT THE PARADIGM”
Thank you for all your support!!!
Sumit Gupta
Page 2
GAAR – Impacts and Implications
INTRODUCTION
General Anti-Avoidance Rule (GAAR) introduced by the Finance Act,2012 is applied to deny tax treaty benefits to non-residents taxpayers who would otherwise be entitled to them through improper use of treaty provisions. Under Indian GAAR, an arrangement whose main purpose or one of the main purposes is to obtain a tax benefit and which satisfies certain prescribed conditions such as lack of commercial substance, abuse of treaty provisions, etc would qualify as an impermissible avoidance arrangement on which GAAR could be applicable. The tax effect of such impermissible avoidance arrangements is to be determined by the Indian Revenue Authority (‘IRA’) in any manner it sees appropriate, which would include disregarding or combining or recharacterising any step / parties in the arrangement, ignoring the arrangement, re-allocating income and expenses, re-characterising equity as debt and vice versa, re-locating the place of residence of any party or suits of an asset, etc. Tax avoided is considered as tax evaded. GAAR can be made applicable in dealing with potential misuse of treaties and can override the