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CMA Final · Direct Tax Laws and International Taxation · GAAR

A resident company, Kaveri Components Ltd, holds shares in a Mauritius entity that is interposed in a structure. The Approving Panel under GAAR gives its direction on the arrangement. Which statement about the effect of that direction is correct?

The Approving Panel's direction is binding on both the taxpayer and the Income-tax authorities. The Assessing Officer must frame the assessment in line with it. It is not merely advisory, and it does not depend on the taxpayer's consent, though the final order can be appealed.

  1. AThe direction is binding on both the taxpayer and the Income-tax authoritiesCorrect
  2. BThe direction binds only the Assessing Officer, not the taxpayer
  3. CThe direction is advisory and the Assessing Officer may disregard it
  4. DThe direction binds the taxpayer only if he agrees in writing

Explanation

The Approving Panel's direction is binding on the assessee as well as on the Income-tax authorities, and the Assessing Officer must complete the assessment in accordance with it. It is not advisory. The distractor saying it binds only the officer is wrong because the taxpayer is also bound, subject to appeal against the resulting order.

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