Investors get a boost, GAAR deferred by two years

According to the Section 9 of the I-T Act, an asset of a company registered outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

[related-post]

Corporates had been demanding a clarification on Section 9, a part of the retrospective amendments carried out in Budget 2012-13 by the then finance minister Pranab Mukherjee. Following the outcry on retrospective amendments in Budget 2012-13, the Parthasarthi Shome panel was set up to review the amendments on indirect transfer to allay the fears of both foreign and domestic investors. The finance bill tabled in the Lok Sabha on Saturday said that a number of recommendations of the expert committee have been accepted.

Lauding the clarification, Amit Maheshwari, partner, Ashok Maheshwary & Associates, said that both the deferral and clarification on indirect transfers have come at the right time. “These are significant steps and investor friendly. The threshold is pragmatic,” he said.

Finance Minister Arun Jaitley said GAAR has certain contentious issues which need to be resolved. Therefore, in a bid to accelerate the momentum of positive investment sentiment, the applicability of GAAR will be deferred by two years to April 1, 2017. Moreover, GAAR would apply prospectively to investments made on or after April 1, 2017.