Download Session_2 - Indian Merchants` Chamber

Session II
Availability of benefit of tax treaties, limitation of
benefit clause and tax avoidance etc
1.
Merely
because
investment
or
transaction are from country where
there are favourable treaties – can it be
said it is treaty shopping and if
substance and commercial justification
exist can it be said to be tax avoidance
Page No 3
2.
If there is no LOB clause in the DTAA, is
it required substance over form principle
and Tax avoidance need to be
established. As against this, if there is
LOB clause in the treaty, say like
Singapore, can it be prima-facie assumed
that substance test is established.
Therefore in such circumstances onus is
on tax department to establish it is a tax
avoidance. (The UN and OECD DTA
commentaries have said it is up to the
countries how do they want to apply the
law).
Page No 4
3.
If the Mauritius company which holds shares
in Indian company, transfers the shares by
the way of gift to Singapore Operating
Company (which is head quarter for South
East Asia and the business and commercial
justification/ consideration of establishment
in Singaporeare established) can Revenue
treat this as Tax avoidance measure, even
though Singapore company satisfies LOB
conditions. In other words, is the objection of
tax avoidance valid, when investment by
holding company is migrated to country,
where more restrictions prevail?
Page No 5
4.
If AAR rules in favour of the applicant
that it is not a case of tax avoidance,
can that be good defence, if the
Revenue wants to invoke GAAR as and
when it becomes operational, against
its‘continuing transaction’?
Page No 6
5.
If the tax payer has multiple
transactions with the same nonresident. Can he claim benefit of
treaty for some transaction and
benefit of provisions of IT Act for
some transactions.
Page No 7
6.
Is it necessary that in order to make
protocol effective and binding, it needs
to be notified / gazetted by the
Government? If there is any variation
in the protocol signed by two countries
and notification issued later on, which
will prevail?
Page No 8
7.
If the tax payer had invested through
Mauritius say 15 years back in Indian
Company, and same has been
disclosed to the Tax Department, year
after year, can the Revenue challenge
the investment, as tax avoidance
measure or treaty shopping, in the year
of sale of shares to third party?
Page No 9
8.
BEPS Action Plan – Preventing granting of
Treaty
Benefit
in
Inappropriate
Circumstances
BEPS Action Plan(Preventing Treaty
Abuse) aims at the following three areas:
(i) Development
of
model
treaty
provisions
and
recommendations
regarding the design of domestic rules
to prevent the granting of treaty
benefits in inappropriate circumstances.
(ii) Clarification that tax treaties are not
intended to be used to generate double
non-taxation.
Cont…
Page No 10
(iii) Identification of the tax policy
considerations that, in general,
countries should consider before
deciding to conclude a tax treaty with
another country.
Further, it proposes various antiabuse
provisions to be inserted into the OECDMC including a Limitation-on-Benefits
(“LOB”) provision, a Main Purpose Test
(“MPT”) and a number of Specific AntiAbuse Rules (“SAARs”).
Page No 11
Questions?