Government of India
                                          Ministry of Finance
                                        Department of Revenue
                                      Central Board of Direct Taxes

                                                                           New Delhi, 27th January, 2017.
                                              PRESS RELEASE

Sub : Clarifications on implementation of GAAR provisions under the Income Tax Act, 1961 ­ reg.

         The provisions of General Anti Avoidance Rule (GAAR) are contained in Chapter X-A of the
Income Tax Act, 1961. The GAAR provisions shall be effective from assessment year 2018-19 onwards,
i.e. financial year 2017-18 onwards. The necessary procedures for application of GAAR and conditions
under which it shall not apply, have been enumerated in Rules 10U to 10UC of the Income-tax Rules,
1962.

       Stakeholders and industry associations had requested for clarifications on implementation of
GAAR provisions and a Working Group was constituted by CBDT to examine the issues raised.
Accordingly, CBDT has issued the clarifications on implementation of GAAR provisions on 27 th January,
2017.






         Amongst others, it has been clarified that if the jurisdiction of FPI is finalized based on non-tax
commercial considerations and the main purpose of the arrangement is not to obtain tax benefit, GAAR
will not apply. GAAR will not interplay with the right of the taxpayer to select or choose method of
implementing a transaction. Further, grandfathering as per IT Rules will be available to compulsorily
convertible instruments, bonus issuances or split / consolidation of holdings in respect of investments
made prior to 1st April 2017 in the hands of same investor. It has also been clarified that adoption of
anti-abuse rules in tax treaties may not be sufficient to address all tax avoidance strategies and the
same are required to be tackled through domestic anti-avoidance rules. However, if a case of avoidance
is sufficiently addressed by Limitation of Benefits (LoB) provisions in the tax treaty, there shall not be an
occasion to invoke GAAR.

        It has been clarified that if at the time of sanctioning an arrangement, the Court has explicitly
and adequately considered the tax implications, GAAR will not apply to such an arrangement. It has also
been clarified that GAAR will not apply if an arrangement is held as permissible by the Authority for
Advance Rulings. Further, it has been clarified that if an arrangement has been held to be permissible in
one year by the PCIT/CIT/Approving Panel and the facts and circumstances remain the same, GAAR will
not be invoked for that arrangement in a subsequent year.






       The proposal to apply GAAR will be vetted first by the Principal Commissioner of Income Tax /
Commissioner of Income Tax and at the second stage by an Approving Panel headed by a judge of High
Court. The stakeholders have been assured that adequate procedural safeguards are in place to ensure
that GAAR is invoked in a uniform, fair and rational manner.

       Government is committed to provide certainty and clarity in tax rules. Further clarifications, if
any, on doubts of stakeholders regarding GAAR implementation, will also be provided.

                                                                                 (Meenakshi J Goswami)
                                                                              Commissioner of Income Tax
                                                                               (Media & Technical Policy)
                                                                              Official Spokesperson, CBDT.