Statutory position — s.102: "tax benefit", "arrangement", "step", "party" and "benefit" — the definitions that decide whether Chapter X-A can start at all
CBDT Circulars & InstructionsCuts both ways
The department says I obtained a "tax benefit" from an "arrangement". Where are those words defined, how wide are they, and does an increase in my carried-forward loss count?
Section 102 is the definition section for the whole Chapter, and its two most important entries are drafted as wide as they could be. "Tax benefit" in s.102(10) is an INCLUSIVE definition — the section says "includes" — and its six sub-clauses cover a reduction, avoidance or deferral of tax or other amount payable under the Act; an increase in a refund; the same two things where they arise as a result of a tax treaty; a reduction in total income; and an increase in loss — each of them "in the relevant previous year or any other previous year". An increase in loss therefore is a tax benefit even in a year in which no tax was payable at all. "Arrangement" in s.102(1) means "any step in, or a part or whole of, any transaction, operation, scheme, agreement or understanding, whether enforceable or not", and includes the alienation of property in it, and "step" in s.102(9) includes "a measure or an action, particularly one of a series taken in order to deal with or achieve a particular thing or object in the arrangement".
Statutory position — Rule 10U: the exclusions a cross-border case must clear first — the Foreign Institutional Investor and offshore-derivative carve-outs, and how the three crore rupee tax benefit is actually computed
CBDT Circulars & InstructionsCuts both ways
Before I argue the merits of a GAAR notice for a foreign investor, which exclusions in Rule 10U do I have to run, and how is the three crore rupee tax benefit figure arrived at?
Rule 10U(1) takes four classes of case outside Chapter X-A altogether. Clause (a) is the monetary floor: the Chapter does not apply to an arrangement where the tax benefit in the relevant assessment year arising "in aggregate, to all the parties to the arrangement" does not exceed three crore rupees. Clause (b) excludes a Foreign Institutional Investor that is an assessee under the Act, that "has not taken benefit of an agreement referred to in section 90 or section 90A", and that has invested in listed or unlisted securities in accordance with the SEBI (Foreign Institutional Investors) Regulations, 1995. Clause (c) excludes a non-resident in relation to an investment made by him "by way of offshore derivative instruments or otherwise, directly or indirectly, in a Foreign Institutional Investor". Clause (d) grandfathers income from the transfer of investments made before 1 April 2017. Rule 10U(3)(iv) then tells you how to quantify the tax benefit for the clause (a) threshold: for sub-clauses (a) to (e) of s.102(10) it is "the amount of tax", and for sub-clause (f), an increase in loss, it is "the tax that would have been chargeable had the increase in loss referred to therein been the total income".