GAAR In Practice: Lessons From Ayodhya Rami Reddy Alla And Anvida Bandi

A brief history

The question of substance over form has been a recurring theme in the interpretation of taxation laws. Indian judicial decisions have taken divergent approaches, where some courts in certain circumstances have held that the legal form of transactions can be dispensed with and the real substance of transaction can be considered while applying the taxation laws, whereas the others have held that form is to be given sanctity.

The foundation of anti-avoidance principles in India rests largely on judicial pronouncements. Although certain specific anti-avoidance provisions (like transfer pricing provisions) exist in the Income-tax framework, the concept of general anti-avoidance had, until recently, evolved solely through precedents.