What is Applicability of General Anti-Avoidance Rule? What is Impermissible avoidance arrangement? Section 95 and 96 of Income Tax Act 1961

Applicability of General Anti-Avoidance and Rule Impermissible avoidance arrangement are defined under section 95 and 96 of Income Tax Act 1961. Provisions under these Sections are :

Section 95 of Income Tax Act "Applicability of General Anti-Avoidance Rule"

Section 95. [(1)] Notwithstanding anything contained in the Act, an arrange- ment entered into by an assessee may be declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter.

[(2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of April, 2018.]
Explanation.-For the removal of doubts, it is hereby declared that the provisions of this Chapter may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement.



Section 96 of Income Tax Act "Impermissible avoidance arrangement"

Section 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 be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole arrangement is not to obtain a tax benefit.

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