Guarding itself against any accusation of ‘tax terrorism’, CBDT today said taxmen will have to take prior approval of a 3-member collegium before declaring that an overseas company has effective management control in India and hence liable to pay tax under the POEM rules.
In first such step to be implemented, the concept of collegium comprising Principal Commissioners of Income Tax is aimed at providing comfort to tax payers and reducing chances of harassment.
The collegium system will also be followed under the General Anti Avoidance Rules (GAAR), which are slated to take effect from April 1, 2017.
Under the Place Of Effective Management (POEM) rules, which were notified today, Assessing Officers (AOs) will also have to seek prior approval of the Principal Commissioner before initiating any proceedings for holding a company incorporated outside India on the basis of its POEM as being resident in India.