Question

Q. Which of the following is/are correct regarding the Parthasarathi Shome Committee report?

Select the correct answer using the codes given below:

• A. 1 only
• B. 3 only
• C. 1 and 3 only
• D. 1, 2 and 3

Answer 1

The correct option is C 1 and 3 only

Explanation:

• Statement 1 is correct: The committee has recommended that Capital gains tax should be abolished and the advanced ruling should be allowed.
• Statement 2 is incorrect: The committee has recommended a monetary threshold of ₹ 3 crores of tax benefit in a year to apply for GAAR. This, on one hand, would filter the smaller cases out and on the other hand, would suggest the need of continued responsive legislation on specific tax-avoidance practices to ensure that the legitimate revenue is raised through voluntary compliance.
• Statement 3 is correct: The report suggests that at the stage of obtaining the withholding tax certificate, unless the taxpayer provides a satisfactory undertaking to the effect that he or she would be prepared to pay taxes at the stage of assessment, GAAR may be applied at even the stage of withholding tax with the permission of the commissioner of income-tax. As withholding tax is applied at a transaction level, even inquiry into GAAR at that stage would make obtaining a withholding tax certificate cumbersome and increase the transaction cost. The delay in obtaining the withholding tax certificate delays the payments to the vendors and is disruptive to the business. It is suggested that there be adequate safeguards in the form of requiring the taxpayer or its representative assessee to file the return and undergo the assessment, it is clarified that at the transaction withholding tax certificate stage, no enquiry shall be made into GAAR.