RECENTLY, the Court of Appeal in U.K. has held the
scheme devised by PWC as invalid, after arriving at the conclusion that, the
scheme is artificial, circular, self-cancelling and designed with no purpose
other than to avoid tax. The scheme involved moving the money through a series
of complex derivative transactions in a circular manner, to avoid the tax
liability, otherwise, payable on the capital gains.
While
the decision is a great victory for HMRC by saving £100m of potentially avoided
tax, this also demonstrates a substantial shift in the manner Courts are
treating such aggressive tax schemes as akin to tax avoidance schemes. Perhaps,
this could serve as a crucial precedent for judicial authorities in various
jurisdictions, including India, in their outlook towards complex taxation
arrangements with the underlying theme of tax avoidance.
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