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TMI BlogInsertion of new Chapter X-A - GENERAL ANTI-AVOIDANCE RULEX X X X Extracts X X X X X X X X Extracts X X X X ..... f this Chapter may be applied 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 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 shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 the round trip financing are transferred or received. (3) Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rangement 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 nature 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, operation, scheme, agreement or understanding; (2) asset includes property, or right, of any kind; (3) benefit includes a payment of any kind whether in tangible or intangible form; (4) connected person means any person who is connected directly or indirectly to another person and includes, (a) any relative of the person, if such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes a person or a permanent establishment which participates or takes part in an arrangement; (7) relative shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of section 56; (8) 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; (9) step includes a measure or an action, particularly one of a series taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 97 provides for circumstances under which an arrangement shall be deemed to lack commercial substance. The period or time for which the arrangement exists; the fact of payment of taxes; and the fact that an exit route is provided by the arrangement, may be relevant but shall not be sufficient for determining whether an arrangement lacks commercial substance or not. 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 in determining whether there is a tax benefit the part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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