Clarifications On GAAR Implementation

The provisions of Chapter X-A of the Income Tax Act, 1961 relating to General Anti-Avoidance Rule (GAAR) will be enforced from 1 April 2017. The Central Board of Direct Taxes (CBDT) received certain queries about the implementation of GAAR provisions. The Board constituted a Working Group in June 2016 for this purpose. The Board has considered the comments of the Working Group and has issued certain clarifications.

Key highlights of the clarification issued are summarised below

• Co-existence of GAAR and Specific Anti-Avoidance Rules (SAAR) provisions depending upon the facts and circumstances of the case.
• Adoption of anti-abuse rules in tax treaties may not be sufficient to address all the tax avoidance strategies. They are required to be tackled through domestic anti-avoidance rules. If a case of avoidance is sufficiently addressed by the Limitation of Benefit (LOB) clause in the treaty, there shall not be an occasion to invoke GAAR.