Shome panel favours deferment of GAAR implementation by 3 yrs
till April 2014, which was introduced by the then Finance Minister Pranab Mukherjee in the 2012-13 Budget.
GAAR provisions were aimed at checking tax avoidance by overseas investors. The proposal, however, generated controversy, with investors expressing apprehensions that it would result in unnecessary harassment by tax authorities.
In order to address the concerns of Mauritius-based investors, the Shome panel has suggested that the provisions of the GAAR should not be invoked to "examine the genuineness of the residency of an entity set up in Mauritius".
Mauritius is the most preferred route for foreign investments on account of liberal taxation regime in the island country. India has a Double Taxation Avoidance Agreement (DTAA) with Mauritius.
India has been expressing concern over misuse of DTAA by foreign investors who route their investments from Mauritius to avoid tax liability.
Chidambaram said there has been no "real progress" on talks with Mauritius on revision of tax treaty with the island nation and the two sides would meet in February or early March.
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