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Friends, it could be important this time.. could you tell why gaar has been delayed till 2016 (and its potential benefit to India) in atleast 150 word format?
Co. A is a rich co. There is another Co. B situated in one of the tax havens say Cayman Island (as in Vodafone case). This Co. B owns (say) 60% of the shares of a company in India (say Co. D).
Co. A decides to buy this Co. B and since B is not in India, the Indian tax rules do not apply. A buys B and escapes paying Capital gains tax. But why should A pay CGT anyways to India - because company B has 60% shares of an India Co. (D) and now these share automatically go in the hands of A. In nut shell A has majority shareholding of D without paying a single penny in taxes to Indian authorities.This is called tax avoidance.
To rectify this GAAR was proposed. GAAR says that IT commissioner can take actions on such dubious business deals made outside India with the purpose of avoiding taxes. -He can send notices to foreigners ,NRIs etc. Also, GAAR applies retrospectively. -GAAR provisions even override the bilateral agreements such as DTAA. -Burden of proof lies with the Co. which has made the deal. -IT Comm has to decide the case in 12 months. It can be appealed in DRP.
Why delayed to 2016? - MNCs dont like it (Obviously) -Sweeping powers to IT commissioner=may misuse his powers for vested interest - No respect for bilateral treaties=no certainity if investments are made. All this culminates into less investments in India by foreign MNCs= Nobody "Makes in India".
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Comments
There is another Co. B situated in one of the tax havens say Cayman Island (as in Vodafone case). This Co. B owns (say) 60% of the shares of a company in India (say Co. D).
Co. A decides to buy this Co. B and since B is not in India, the Indian tax rules do not apply. A buys B and escapes paying Capital gains tax. But why should A pay CGT anyways to India - because company B has 60% shares of an India Co. (D) and now these share automatically go in the hands of A. In nut shell A has majority shareholding of D without paying a single penny in taxes to Indian authorities.This is called tax avoidance.
To rectify this GAAR was proposed. GAAR says that IT commissioner can take actions on such dubious business deals made outside India with the purpose of avoiding taxes.
-He can send notices to foreigners ,NRIs etc. Also, GAAR applies retrospectively.
-GAAR provisions even override the bilateral agreements such as DTAA.
-Burden of proof lies with the Co. which has made the deal.
-IT Comm has to decide the case in 12 months. It can be appealed in DRP.
Why delayed to 2016?
- MNCs dont like it (Obviously)
-Sweeping powers to IT commissioner=may misuse his powers for vested interest
- No respect for bilateral treaties=no certainity if investments are made.
All this culminates into less investments in India by foreign MNCs= Nobody "Makes in India".