General Anti Avoidance Rule

1. GAAR
General Anti Avoidance Rule
Complied by
Akash Shankar Choudhary

2. Basics
 Tax Planning:-is analysis of one financial situation from tax. Tax planning
allows a payer to make the best use of various under tax exemptions and
deductions to minimize their tax liability
 Tax Evasion:- is illegal invasion of taxes by the individuals corporations;
it entails misrepresenting the true state of affairs to tax authorities.
 Tax Avoidance:- is the legal use of tax regime in the single territory to
once that advantage to reduce the amount of tax that is payable by the
means of that are written in law.

3. Basics
Tax planning is within the ambit of provisions of the Income Tax Act there
will be no legal proceeding against the assessee.
Tax Evasion involves illegal evasion of taxes by misrepresenting the true
state to the income tax authorities so there will be legal proceeding against
the assessee and also the penalties will be levied under the provision of
Income Tax Act.
Tax Avoidance is identifying the loop holes in provision and make of
arrangements to take advantages of those loop holes as the result does not
result into illegal invasion of taxes hence there is no tax evasion and there
will be no legal proceedings against the assessee.
 So in order to curb Tax Avoidance the Govt of India has come up with the
concept GAAR (General Anti Avoidance Rule)

4. Sections And Rules
Section 95 : Applicability of General Anti-Avoidance Rule
Section 96 : Impermissible avoidance arrangement
Section 97 : Arrangement to lack commercial substance
Section 98 : Consequences of impermissible avoidance arrangement
Section 99 : Treatment of connected person and accommodating party
Rule 10U : Application of General Anti Avoidance Rule
Miscellaneous

5. Section 95 : Applicability
Not withstanding anything contained in the Act
 arrangement may be declared as Impermissible Avoidance Arrangement &
Consequences in relation to tax may be determined subject to provision of
the Act.
Arrangement (Sec 102) means any step in part or whole of :-
 Transaction
 Operation
 Scheme
 Agreement
 Understanding; and
include alienation of any property.

6. Section 96 : Impermissible Avoidance Arrangement
main purpose is
to obtain tax
benefit and
Creates right and
obligation not ordinarily
created between persons
dealing at arm’s length
Results directly or
indirectly in the misuse
or abuse of the
provision of this act
Lack commercial
substance or deemed to
lack commercial
substance
Is entered, carried out
by means or manners
not ordinarily employed
for bona-fide purpose

7. Section 96 : Impermissible Avoidance Arrangement
All arrangement shall presumed to be Impermissible Avoidance
Arrangement until and unless it is proved to be contrary by the assessee.
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.

8. Section 97: Consequences of IAA
Consequences in relation to tax including denial of tax benefit or benefit of tax
treaty shall be determined as deemed appropriate in the circumstances but
not limited to:
Disregarding, combining or recharacterizing any step in IAA
Treating IAA as if not entered into or carried out
Disregarding or treating any accommodating party as one and same
person
Deeming connected person to be one and same person
Reallocating any receipt, expenditure, relief or rebate among the parties
Treating place of residence, suits of assets or transaction other than the
original place
Considering or looking any arrangement by disregarding corporate
structure

9. Section 97:Arrangement to lack commercial substance
Arrangement to
lack commercial
substance
Substance or effect of
arrangement as a whole is
inconsistent or differs from,
the form of individual steps
 Round trip financing
 Accommodating part
 Offsetting or cancelling effect
 Transaction conducted
through one or more person
to disguise value, location
source, ownership
Involves, location of assets or
transaction or place of
transaction without any
substantial commercial
purpose other than obtaining
tax benefit
Does not have significant
impact on the business risk or
cash flows of any parties to the
arrangement apart from
attributable tax benefit that
would be obtained

10. Section 97:Arrangement to lack commercial substance
Round trip financing includes any arrangement in which, through a series of
transactions
funds are transferred among the parties to the arrangement; and
such transactions do not have any substantial commercial purpose other than
obtaining the tax benefit
• Accommodating party means:
the main purpose of the direct or indirect participation of that party in the
arrangement, in whole or in part, is to obtain directly or indirectly, a tax benefit

11. Section 99:Treatment of Connected Persons &
Accommodating Party
 For determining weather the tax benefit exists:-
Parties connected to each other in relation may be treated as one party
Any accommodating party may be disregarded
Accommodating party or any other party may be treated as one person
Arrangement may be considered or look through by disregarding any corporate
structure

12. Rule 10U:Application of General Anti Avoidance Rule
The provision GAAR will not be applicable in following cases :
Arrangement where tax benefit in aggregate to all parties in the arrangement does
not exceed 3 crores
Foreign institutional Investors:
Who is assessee under the act
Not taken the benefit of agreement refereed u/s 90 and 90A
Who has invested in listed and unlisted securities in accordance with SEBI
Regulations, 1955
Investment made by non resident by the way of offshore derivative directly or
indirectly in Foreign Institutional Investor
Any income arising or accruing deemed to arising or accruing from transfer of
investment before 1st April, 2017

13. Miscellaneous
Section 100 :
The provisions of this Chapter shall apply in addition to, or in lieu of, any other
basis for determination of tax liability.
Section 101
The provisions of this Chapter shall be applied in accordance with such guidelines
and subject to such conditions, as may be prescribed.
Section 144AB :
Reference to Principal Commissioner or Commissioner in certain cases
Rule 10UC:
Time limits for the purpose of sections 144AB
Rule 10UB
Notice, Forms for reference under section 144BA.

14. Thank You!