What is Applicability of General Anti-Avoidance Rule?
What is Impermissible avoidance arrangement? Section 95 and
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,
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
Section 96. (1) An
impermissible avoidance arrangement means an arrangement,
the main purpose of which is to obtain a tax benefit, and
(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;
(d) is entered into, or carried out, by means, or in a
manner, which are not ordinarily employed for bona fide
(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.