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.
The rules provide that if an AO proposes to hold a company incorporated outside India as being resident in India based on POEM, then any such finding shall be given by the AO after seeking prior approval of the collegium of three members consisting of Principal Commissioners or the Commissioners.
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"The collegium so constituted shall provide an opportunity of being heard to the company before issuing any direction in the matter," the POEM guiding principles said.
"However, the POEM rules have been diluted to some extent as they will not apply to companies having a turnover or gross receipts of Rs 50 crore or less in a financial year," Nangia said.