Will examine,maybe modify GAAR: FM

In his budget for 2012-13,Finance Minister Pranab Mukherjee had said that the government wanted to introduce GAAR in order to 8220;counter aggressive tax avoidance schemes,while ensuring that it is used only in appropriate cases,by enabling a review by a GAAR panel8221;.

Securities and Exchange Board of India SEBI Chairman U K Sinha had said yesterday the government 8220;is going to have a new look at tax avoidance,so they they are going to work in that way8221;.

The fear of GAAR had spooked stock markets which tanked 2 per cent yesterday on concerns that all short-term capital gains made by FII and P-Note investments would be taxed. The Sensex,however,recovered today rising over 200 points.

Meanwhile,Finance Ministry sources seeking to allay fears that Participatory Notes 8212; an instrument through which FIIs unregistered with Sebi invest in stock markets 8212; said that the I-T department will have to first prove the intention of avoidance before making GAAR applicable.

8220;GAAR is not created to target any class of financial instruments. The onus of proving tax avoidance lies mainly with the government and partially on the assessee,8221; sources said.

8220;All benefits which a person is entitled in a DTAA Double Taxation Avoidance Agreement treaty can be overruled or denied if GAAR is invoked,8221; sources said.

Provisions of GAAR will be applicable from April 1 and not with retrospective effect.