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CMA Final · Direct Tax Laws and International Taxation · GAAR

Which of the following is correct regarding the interaction of GAAR with tax treaties and other anti-avoidance provisions in India?

GAAR can be invoked to deny a tax treaty benefit where the arrangement is an impermissible avoidance arrangement. Treaty benefits do not automatically shield an arrangement, and the rules apply to non-residents as well as residents.

  1. AGAAR can be applied to deny a treaty benefit if the arrangement is an impermissible avoidance arrangement, and it applies in addition to specific anti-avoidance rules only as the rules provideCorrect
  2. BGAAR never applies to treaty benefits because treaties always override domestic law
  3. CGAAR applies only to resident assessees and never to non-residents
  4. DGAAR applies only when the specific anti-avoidance rules have been repealed

Explanation

GAAR provisions apply to any impermissible avoidance arrangement, including one aimed at obtaining a treaty benefit, and can be invoked to deny it. The idea that treaties always override, or that only residents are covered, is incorrect.

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