GAAR Provisions Cannot Be Applied Retrospectively

Background

As a deterrent to tax avoidance, Indian tax law incorporated General Anti-Avoidance Rules (GAAR) provisions, effective for transactions entered from fiscal year 2017-18. (Please click here to read our Publication on GAAR). With the introduction of GAAR provisions, each transaction will attract detailed scrutiny from the Tax Officer. While GAAR had been introduced on prospective basis, recently, Kolkata Tax Tribunal¹ had an occasion to delve on a transaction where the First Appellate Authority had applied GAAR retrospectively, even though the scheme of amalgamation was approved by the Punjab & Haryana High Court and Delhi High Court. We, at BDO in India, have summarised the ruling of the Kolkata Tribunal and provided our comments on the impact of this decision.