General Anti Avoidance Rules. Inserted by way of Finance Act 2012 in the house of Indian Parliament for Income Tax Act 1961.

1. GAAR
Dileep Kumar Anumula

2. Aim
• Combating Impermissible tax avoidance

3. Do we have this concept
already in Act???
• Yes!
• Act already notified SAAR
Ex:
1. S. 40A(2) – Excessive/Un reasonable pymts to Related
parties.
2. S. 80IA(8) – Transactions with Tax exempt entities
3. S. 92 to 92F – TP Provisions.
4. S. 2(22)(e) -Deemed Dividend.

4. When GAAR Comes in to
Picture???
• As name suggests it comes in to picture, when there is
a reduction of Tax liability by way of acts which are
forbidden by law.
• Reduction of Tax liability can be made by many ways.
But the all the ways can be clubbed in to three major
catagories

5. Three Categories
Tax Evasion Tax Avoidance Tax Planning
Gen result of Illegality,
rep. or Fraud.
Result of Actions none
which are forbidden by
law
Result of Tax
made avbl by the Act
Not Applies
Applies
Not Applies

6. Legal Enforcement
• Fin. Act, 2012 inserted new chapter, CH XA containing
S. 95 to S. 102
• W.E.F AY 2014-15
• Later based on Shome Committee postponed to 2yrs
• Hence now GAAR comes in to force W.E.F 1/4/2016.

7. Coming in to Provisions
a) Notwithstanding any thing contained in any provisions of the
act…..
b) There is an arrangement as defined in s.96(1)
c) The arrangement is entered in to by an a’see (s.95)
d) The arrangement is IAA (s. 96(1))

8. If the above (a) to (d) are
satisfied, then
i. The arrangement may be declared to be an IAA, sub
to the prov of the CH XA.
ii. The consequences in relation to tax arising there from
may be determined based on S. 95 to S. 98

9. Inference of the above reading:
• Provisions shall be:
i. Applicable in addition to (or) in lieu of, any other
basis for determination of tax liability (s. 100)
ii. Applied in acc with guidelines sub to such conditions
& the manner as may be prescribed in S.101
iii. Applicable to all ( Ind/HUF/Firm/Coy)
iv. Applicable irrespective of Res. Status

10. Prime Definitions
Arrangement (Exhaustive):
Any step in or a part (or) whole of, any transaction,
operation, scheme, agreement or understanding, whether
enforceable or not, and includes alienation of any property
in such transaction, operation, scheme, agreement o
understanding. (none of these are defined in the act)

11. Prime Definitions contd…..
• Meaning of Arrangement:
a) Any step in any enforceable transaction, operation,
scheme agreement or understanding etc.
b) Any step in any un-enforceable transaction
c) A part or whole of any enforceable/ Un-enforceable
transaction
d) Alienation of any property in any such transaction.

12. Impermissible Avoidance Agreement
(IAA)
There is an arrangement
The main purpose is to obtain Tax benefit
The arrangement satisfies any one of the following……..

13. IAA contd….
a) It creates rights/obligations which are not ordinarily created
b/w persons dealing at ALP.
b) It results directly or Indirectly, in the Misuse/abuse of
provisions of the act
c) It lacks commercial substance in whole or in part.
d) It is deemed to lack commercial substance in whole or in
part with in the meaning of S.97
e) It is entered in to by means or in a manner which are not
ordinarily employed for bonafide purpose.

14. Is GAAR Retrospective?????
• On the budget day of FA 2012, FM stated that
“Investments made before Aug 30-2010, the date of
introduction of DTC Bill 2010, will be Grandfathered”.
• But the commerce community hopes that CG will
reconsider its decision and grandfather investments made
prior to commencement of GAAR to 1-4-2016.

15. Any monetary Threshold limit…..?
• Yes!
• The final Report of Expert committee recommended that
a monetary threshold limit of Rs. 3 cr. Of tax benefit,
to a taxpayer in a year should be used for the
applicability of GAAR provisions.

16. Applicability of GAAR in SAAR
cases…
• GAAR has no role of application where SAAR is
available in the Act already.
• However Govt Press release dt. 14-1-2013 states that,
“where GAAR & SAAR are both in force, only one of
them will apply to a given case, and guidelines will be
made regarding the applicability of one or the other”

17. Applicability to FII’s
FII
Other FII’SFII’S
Not taken
benefit u/s
90/90A
Non-resident
investors in
FII’s
Not Applies Applies

18. Applying GAAR Procedure…..
• AO Can’t issue order without CIT approval.
At Any stage of Assessment or Re-assessment
Having regard to evidence & Material avbl
Makes ref. to CIT. CIT on receipt of ref, if CH-XA is
to be invoked,

19. GAAR Procedure….. Contd…
Issues notices setting out of reasons, basis of opinion
after providing OBH, with in 60 days.

20. Assesse’s Reaction
Assesse
Objects
CIT Satisfies
CIT Not
Satisfies
Doesn’t
Objects
CIT shall issue such
directions as he deems
fit in respect of
declaration of
arrangement to be an
IAA
Shall not
Invoke
Shall Invoke
by making
ref. to
Approving
panel