TMI BlogInsertion of new Chapter X-A - GENERAL ANTI-AVOIDANCE RULEX X X X Extracts X X X X X X X X Extracts X X X X ..... persons dealing at arm s length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. (2) An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole arrangement is not to obtain a tax benefit. Arrangement to lack commercial substance 97. (1) An arrangement shall be deemed to lack commercial substance, if (a) the substance or effect of the arrangement as a whole, is inconsistent with, or differs significantly from, the form of its individual steps or a part; or (b) it involves or includes (i) round trip financing; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod or time for which the arrangement (including operations therein) exists; (ii) the fact of payment of taxes, directly or indirectly, under the arrangement; (iii) the fact that an exit route (including transfer of any activity or business or operations) is provided by the arrangement. Consequences of impermissible avoidance arrangement. 98. (1) If an arrangement is declared to be an impermissible avoidance arrangement, then, the consequences, in relation to tax, of the arrangement, including denial of tax benefit or a benefit under a tax treaty, shall be determined, in such manner as is deemed appropriate, in the circumstances of the case, including by way of but not limited to the following, namely: - (a) disregarding, combining or recharacterising any step in, or a part or whole of, the impermissible avoidance arrangement; (b) treating the impermissible avoidance arrangement as if it had not been entered into or carried out; (c) disregarding any accommodating party or treating any accommodating party and any other party as one and the same person; (d) deeming persons who are connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) asset includes property, or right, of any kind; (3) benefit includes a payment of any kind whether in tangible or intangible form; (4) connected person means any person who is connected directly or indirectly to another person and includes, (a) any relative of the person, if such person is an individual; (b) any director of the company or any relative of such director, if the person is a company; (c) any partner or member of a firm or association of persons or body of individuals or any relative of such partner or member, if the person is a firm or association of persons or body of individuals; (d) any member of the Hindu undivided family or any relative of such member, if the person is a Hindu undivided family; (e) any individual who has a substantial interest in the business of the person or any relative of such individual; (f) a company, firm or an association of persons or a body of individuals, whether incorporated or not, or a Hindu undivided family having a substantial interest in the business of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax or other amount under this Act; or (c) a reduction or avoidance or deferral of tax or other amount that would be payable under this Act, as a result of a tax treaty; or (d) an increase in a refund of tax or other amount under this Act as a result of a tax treaty; or (e) a reduction in total income; or (f) an increase in loss, in the relevant previous year or any other previous year; (11) tax treaty means an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A. . - Clause 24 of the Bill seeks to insert a new Chapter X-A consisting of new sections 95, 96, 97, 98, 99, 100, 101 and 102 in the Income-tax Act relating to General Anti-Avoidance Rule. The provisions of the proposed new section 95 provide that an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and consequences in relation to tax of such a declaration can be determined. The proposed section 96 provides the definition and conditions under which an arrangement can be declared to be an impermissible avoidance arrangement. The section also provides f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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