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TMI BlogInsertion of new Chapter X-A.X X X X Extracts X X X X X X X X Extracts X X X X ..... to any step in, or a part of, the arrangement as they are applicable to the arrangement. Impermissible avoidance arrangement. 96. (1) An impermissible avoidance arrangement means an arrangement, the main purpose or one of the main purposes of which is to obtain a tax benefit and it (a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm s length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. (2) An arrangement which res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for a party. (2) For the purposes of sub-section (1), round trip financing includes any arrangement in which, through a series of transactions (a) funds are transferred among the parties to the arrangement; and (b) such transactions do not have any substantial commercial purpose other than obtaining the tax benefit (but for the provisions of this Chapter), without having any regard to (A) whether or not the funds involved in the round trip financing can be traced to any funds transferred to, or received by, any party in connection with the arrangement; (B) the time, or sequence, in which the funds involved in the round trip financing are transferred or received; or (C) the means by, or manner in, or mode through, which funds involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if it had not been entered into or carried out; (c) disregarding any accommodating party or treating any accommodating party and any other party as one and the same person; (d) deeming persons who are connected persons in relation to each other to be one and the same person for the purposes of determining tax treatment of any amount; (e) reallocating amongst the parties to the arrangement (i) any accrual, or receipt, of a capital or revenue nature; or (ii) any expenditure, deduction, relief or rebate; (f) treating (i) the place of residence of any party to the arrangement; or (ii) the situs of an asset or of a transaction, at a place other than the place of residence, location of the asset or location of the transaction as provided under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, scheme, agreement or understanding; (2) asset includes property, or right, of any kind; (3) associated person , in relation to a person, means (a) any relative of the person, if the person is an individual; (b) any director of the company or any relative of such director, if the person is a company; (c) any partner or member of a firm or association of persons or body of individuals or any relative of such partner or member if the person is a firm or association of persons or body of individuals; (d) any member of the Hindu undivided family or any relative of such member, if the person is a Hindu undivided family; (e) any individual who has a substantial interest in the business of the person or any relative of such individual; (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, to receive, or pay, the cash or cash equivalent; (7) party means any person including a permanent establishment which participates or takes part in an arrangement; (8) relative shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of section 56; (9) a person shall be deemed to have a substantial interest in the business, if (a) in a case where the business is carried on by a company, such person is, at any time during the financial year, the beneficial owner of equity shares carrying twenty per cent. Or more, of the voting power; or (b) in any other case, such person is, at any time during the financial year, beneficially entitled to twenty per cent. or more, of the profits of such business; (10) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out for main purpose of obtaining tax benefit. The proposed section 97 provides for circumstances under which an arrangement shall be deemed to lack commercial substance. The proposed section 98 provides for method of determination of consequences in relation to tax of an arrangement after it is declared to be an impermissible avoidance arrangement. It provides for certain illustrative but not exhaustive methods for determination of tax consequences. The proposed section 99 provides that for determining tax benefits for the purposes of the newly inserted Chapter X-A parties who are connected may be treated as one and same person, accommodating party may be disregarded; any accommodating or other party to an arrangement may be treated as o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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