Column : Foreign investors vs local taxmen

The final report carries the suggestions of the first draft with changes mainly in the following aspects. First, to ensure more independence in the functioning of the approving panel, the jurisdictional chief commissioner/commissioner would not sit in deciding a case where their direct subordinates were involved as assessing officers.

Second, an appropriate mechanism has been recommended to be provided to ensure confidentiality of information of the taxpayer.

And third, when a tax officer has to decide an application for lower withholding but the taxpayer is not willing to submit a satisfactory undertaking, it has been recommended that the tax officer be given the power to inform the taxpayer, with prior approval of the commissioner, of his likely tax liability in the eventuality of invocation of GAAR in the assessment proceedings of the payee. The prospect of GAAR proceedings being initiated at the withholding stage itself should have best been eliminated, because once tax avoidance is suspected on the basis of a preliminary understanding, it would most likely result in the invocation of GAAR at the stage of assessment. The committee has sought to justify this on the basis that India has primarily a source-based system of taxation and some assurance of collection may be necessary. It is not very clear what “assurance of collection” would be met by the power to inform the taxpayer

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