WISCONSIN INTERNATIONAL
UNIVERSITY COLLEGE, GHANA
COURSE: LAW OF TAXATION II
1
COURSE CODE: WLA 410
TOPIC: TAX AVOIDANCE AND TAX EVASION
LECTURER: DICKSON KWAME AGBOGAH
TAX AVOIDANCE
AND
TAX EVASION
2
RESISTANCE TO TAX
Resistance to tax is of two main kinds.
These are
Tax evasion and
Tax avoidance
The general view is that tax evasion involves
illegality and judges have always abhorred it.
Tax avoidance on the under hand is legal if it is
done within the confines of the law.
3
WHAT TAX AVOIDANCE ?
According to Professor Wheatcroft, tax
avoidance is the act of dodging tax without
breaking the law.
Thisis only true in situations where there is no anti-
avoidance legislation of one kind or the other and a
breach of the provisions of such anti-avoidance
legislation amounts to an illegal conduct.
TheIncome Tax Act, 2015 (Act 896) defines tax
avoidance scheme in SECTION 34(2)(c) as an
arrangement, the main purpose of which is to
avoid or reduce tax liability.
4
TAX AVOIDANCE (CON’T)
Section 99 (4) and (5) of the Revenue Administration
Act, 2016, (Act 915) defines “tax avoidance
arrangement” to mean:
An arrangement that has as a main purpose the
provision of a tax benefit for a person; or
An arrangement where the main benefit that might be
expected to accrue from the arrangement is a tax benefit
for a person; and
An arrangement is a “tax avoidance arrangement” only
if it involves a misuse or abuse of a tax law provision
having regard to the purpose of the provision and the
wider purposes of the law in which the provision is
5
situated.
APPROACHES TO TAX AVOIDANCE
There are three main approaches by the
courts to tax avoidance schemes.
These are
The Traditional Approach
The Modern Approach and
The Doctrine of Form and Substance (The
Doctrine Substance over Form)
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THE TRADITIONAL APPROACH
This approach was echoed by Lord Cairns in Pattington
v Attorney-General [1969] LR 4 HL 100 at 122 in the
following words:
As I understand, the principle of fiscal legislation it is
this- if the person sought to be taxed comes within the
letter of the law he must be taxed however great the
hardship may appear to the judicial mind to be, on the
other hand if the Crown seeking to recover the tax cannot
bring the subject within the letter of the law the subject
must be free however apparently within the spirit of the
law the case might otherwise appear to be.
7
THE TRADITIONAL APPROACH
(CON’T)
Lord Norman has warned on tax avoidance in
Vestry’s Executors v IRC [1949] 31 TC 1 at 90
in the following words:
Tax avoidance is evil but it will be greater evil if
the courts were to stretch the language of the
statute in order to subject to taxation people
whom they disapprove. There has therefore been
a lot of controversy over the limits of legitimacy
of tax avoidance since it is an admitted evil
8
THE TRADITIONAL APPROACH
(CON’T)
Lord Sumner re-echoed the acceptability of
tax avoidance in IRC v Fisher’s Executors in
the following words:
My Lords, the highest authorities have always
recognised that the subject is entitled so to arrange
his affairs as not to attract taxes imposed by the
Crown, so far as he can do so within the law, and
that he may legitimately claim the advantage of any
expressed terms or any omissions that he can find in
his favour in the taxing Acts. In so doing he neither
comes under liability nor incurs blame.
9
SPIRIT AND THE LETTER OF THE LAW
Inthe Classic expression of Rollatt J. a masterly
revenue lawyer, he said in Cape Brandy
Syndicate v IRC that
In the taxing Act one has to look at what is
clearly said. There is no room for intendment;
there is no equity about tax. There is no
presumption as to tax. Nothing is to be read
in, nothing is to be implied, one can only look
fairly at the language used.
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SPIRIT AND THE LETTER OF THE LAW (CON’T)
InAyshire Pullman Motors Services v IRC
[1929] 14 TC 754 at 763 case Lord Clyde
L.P declared that:
No man in this country is under the smallest
obligation, moral or other so as to arrange his
legal relations to his business or property so
as to enable the Inland Revenue to put the
largest possible shovel into his stalls.
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SPIRIT AND THE LETTER OF THE LAW
(CON’T)
Lord Tomlin sealed it all in
IRC v Duke of Westminster
[1936] AC 1 at 19 as follows:
Everyman is entitled if he can, to order his
affairs so that the tax attaching under the
appropriate Act is less than it otherwise would
be. If he succeeds in ordering them so as to
secure this result then however unappreciative
the Commissioner of Inland Revenue or his
fellow tax-gatherers may be of his ingenuity he
cannot be compelled to pay an increased tax. 12
MODERN APPROACH
In contrast to the above position, the advent of the Second
World War caused judicial sympathy to shift dramatically
from the taxpayer to fiscal policy considerations.
In 1941 Lord Greene MR in Howard de Walden (Lord) v IRC
(1941-1943) 21 TC 121 issued a stern warning to would be tax
avoiders in the following words:
For years a battle of maneuver has been waged between the
legislature and those who are minded to throw the burden of
taxation off their own shoulders onto those of their fellow subjects.
In that battle the legislature has often been worsted by skill,
determination and resourcefulness of its opponents of whom the
present appellant has not been the least successful. It would not
shock us in the least that the legislature is determined to put an end
to the struggle by imposing the severest of penalties. It scarcely lies
13
in the mouth of the taxpayer who plays with fire to complain with
finger burns.
MODERN APPROACH (CON’T)
After the War the pendulum swung back- there was a
shift back, there was a boom in the tax avoidance
industry and a whole host of tax avoidance
transactions of varying degrees of complexity were
carried out.
Lord Denning was an outstanding exponent of the anti-
avoidance campaign.
In Griffith v J. P Harrison (Watford) Ltd. [1963] AC 1,
Lord Denning delivered a dissenting judgment
describing tax avoiders as:
Prospectors, digging for wealth in the subterranean
passages of the revenue, searching for tax
repayments. 14
GRIFFITH V J. P HARRISON (WATFORD) LTD.
Harrison was into business which made losses.
He made a decision to invest in shares of another company and had
controlling interest.
He therefore changed the Article of Association of the company to
include the object of investing in shares.
The new company declared dividends which he paid taxes on.
Thereafter, Harrison disposed his shares and made a loss.
He sought to utilise the losses from business and disposal of shares
against the dividend income.
The ultimate result was to get repayment of taxes he had paid on the
dividend
NB: Dividend Stripping- buying shares/mutual funds units a short
period before dividend is declared and then selling them off right 15
after the receipt of the dividend, when the share price falls below the
purchase price.
HYPOTHETICAL ILLUSTRATION OF
HARRISON
All amounts are in GHS
Business Investment
1 Investment in shares @ 30,000
Income 2,000 2 Dividend Declared 29,500
Expenses 20,000 Taxes 13,275
Tax loss -18000 3 Sale of Shares @ 15,000
4 loss made=15,000-30,000= -15,000
Dividend Stripping - tax avoidance (repayment)
Dividend Income 29,500
Tax loss - business -18000
Tax loss - Investment -15,000
-3,500
Refund or Repayment claimed = 13,275 16
This was because the dividend stripping arrangement had given rise to an
aggregate tax loss position
MODERN APPROACH (CON’T)
In addition to Lord Denning’s caution, there still appeared to be
an unceasing judicial hostility to tax avoiders.
Stamp J in Re Weston’s Settlement [1968] 1 All ER 720 observed
as follows:
There must be some limit to the devices which this court
ought to countenance in order to defeat the fiscal intentions of
the legislature. In my judgment, these proposals overstep that
limit … I am not persuaded that this application represents
more than a cheap exercise in tax avoidance which I ought
not to sanction, as distinct from a legitimate avoidance of
liability to taxation.
MODERN APPROACH (CON’T)
Lord Reid’s observation in Greenberg v IRC, dealing with
forward dividend stripping that (Page 177 of Textbook)
W.T Ramsay Ltd. v IRC [1982] AC 300- marked a
significant departure from Westminster and the Fisher’s
Executors principle
The House of Lords considered a claim that certain self-
cancelling transactions could be used to create a non-
taxable gain and a tax relievable loss. The Lords applied
what became known as the Ramsay Doctrine, stating that
the Court was entitled to look at the whole transaction and
so to conclude that the taxpayer had not suffered a loss.
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W.T RAMSAY LTD. V IRC (CON’T)
The House of Lords had to consider a scheme of tax avoidance
which consisted of a series or combination of transactions, each of
which was individually genuine, but the result of all which was
avoidance of tax.
The court cannot be compelled to look at a document or
transaction in blinkers, isolated from any context to which it
properly belongs.
It is the task of the court to ascertain the legal nature of any
transaction to which it is sought to attach…
While the techniques of tax avoidance progress and are technically
improved, the courts are not obliged to stand still. Such immobility
must result either in loss of tax, to the prejudice of other taxpayers,
or Parliamentary congestion or (most likely) to both.
The capital gains tax was created to operate in the real world, not
that of make-belief 19
IRC V BURMAH OIL CO. LTD [1982] STC 30
The significance of Ramsay as the turning point in the
interpretation of tax laws in England and the departure
from Westminster case were explained in IRC v Burmah
Oil Co. Ltd , per Lord Diplock.
It would be disingenuous and dangerous on the part of
those who advise on the elaborate tax-avoidance schemes
to assume that Ramsay’s case did not mark a significant
change in the approach adopted by this House [i.e. HL] in
its judicial role to a pre-ordained series of transactions
(whether or not they include the achievement of a
legitimate commercial end) into which there are inserted
steps that have no commercial purpose apart from the
avoidance of a liability to tax.
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IRC V BURMAH OIL CO. LTD (CON’T)
Lord Scarman said:
First, it is of utmost importance that the business
community (and others, including their tax
advisers) should appreciate, as my noble and
learned friend, Lord Diplock has emphasized,
that, Ramsay’s case marks ‘a significant change
in the approach adopted by this House in its
judicial role’ towards tax avoidance schemes
21
FURNISS V DAWSON [1984] 1 ALL ER 530; 2 WLR 226
The above case reiterated the decision in Ramsay
Lord Brightman observed that
The fact that the court accepted that each step in the
transaction was a genuine step producing its intended legal
result did not confine the court in considering each step in
isolation for the purpose of assessing the fiscal results.
Lord Fraser explained the principle of Ramsay as follows:
The true principle of the decision in Ramsay was that the
fiscal consequences of a preordained series of transactions,
intended to operate as such, are generally to be ascertained
by considering the results of the series as a whole, and not
dissecting the scheme and considering each individual
transaction separately. 22
FURMISS V DAWSON (CON’T)
Lord Roskill
The error, if I may venture to use that word, into which
the courts below have fallen is that they have looked back
to 1936 and not forward from 1982. They do not appear
to have appreciated the true significance of the passages
in the speeches in Ramsay’s case
when the ghosts of the past stand in the path of justice,
clanking their medieval chains, the proper course for the
judge is to pass through them undeterred… I confess that
I had hoped that the ghost might have found quietude
with the decisions in Ramsay and in Burmah. Unhappily,
it has not. Perhaps, the decision of this House in these
appeals will now suffice as exorcism.
23
MODERN APPROACH (CON’T)
Westminster has been given a decent
burial in its country of origin.
The courts now concern themselves not
merely with the genuineness of a
transaction, but also with the intended
effect of the transaction on fiscal purposes.
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DOCTRINE OF FORM AND SUBSTANCE
It is to the effect that the substance rather than the technical form of a transaction
governs its tax consequences.
IRC v Duke of Westminster [1936] AC1 at 19
The Duke of Westminster used to employ a gardener and pay him from his post-tax
income, which was substantial.
To reduce tax, the Duke stopped paying the gardener's wage and instead drew up a
covenant, agreeing to pay an equivalent amount at the end of every specified
period.
Under the tax laws of the time, this allowed the Duke to claim the expense as a
deduction, thus reducing his taxable income and his liability towards income tax
and surtax.
The Inland Revenue challenged this arrangement as being tantamount to tax
evasion and took the Duke to court. They however lost their case.
The Judge, Lord Tomlin, famously said:
Every man is entitled, if he can, to order his affairs so that the tax attaching under
the appropriate Acts is less than it otherwise would be. If he succeeds in ordering
them so as to secure this result, then, however unappreciative the Commissioners 25 of
Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be
compelled to pay an increased tax.
IRC V DUKE OF WESTMINSTER (CON’T)
Lord Tomlin moreover said:
This so-called doctrine of ‘the substance’ seems to me to be nothing
more than an attempt to make a man pay notwithstanding that he has
so ordered his affairs that the amount of tax sought from him is not
legally claimable.
Although this ruling was attractive for others seeking to avoid
tax legally by creating complex structures, it has since been
weakened by subsequent cases, where the courts have looked at
the overall effect.
An example is the Ramsay principle where, if a transaction
had pre-arranged artificial steps that served no commercial
purpose other than to save tax, the proper approach was to
tax the effect of the transaction as a whole.
26
RULES FOR THE DOCTRINE OF FORM AND
SUBSTANCE
A number of rules have crystalized over the years and became the modern
version of the doctrine. The rules are as follows:
Rule 1. Here descriptions attached to a transaction by the parties to it are not
decisive of its true nature
Secretary of State in Council for India v Scoble [1903] AC 209, in which instalment
payments were described as a annuity but was held that it would not determine the
rate of the payment for tax purposes
Rule 2 states that rights and liabilities created by sham transactions are
utterly disregarded,
Johnson v Jewith [1961] 40 TC 231, in which a flagrant attempt to create an
artificial loss was rejected by the Court of Appeal as a cheap exercise of “fiscal
conjuring and bookkeeping fantasy” per Donovan LJ.
Rule 3, which states that, whilst rights and liabilities created by genuine
transactions cannot be disregarded, the surrounding circumstances are used in
determining those rights and liabilities
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IRC v Horrocks [1968] 3 All ER 296;
Sargaison v Roberts [1969] 45 TC 612.
ANTI-TAX AVOIDANCE LEGISLATION
Lord Morton once described the struggle between Parliament
and the taxpayer’s advisers as undignified game of chess:
Parliament imposes a charge and the adviser finds a way
to avoid it. Parliament enacts anti-avoidance legislation,
advisers device a more elaborate avoidance as in
Chapman v Chapman [1942] AC 429 at 468
Canada, Australia and South Africa are among the countries
known to have elaborate anti-avoidance legislation against
schemes designed to secure tax avoidance.
ANTI-AVOIDANCE PROVISIONS IN GHANA’S
INCOME TAX ACT, 2015 (ACT 896)
Section 18 (3)- Change in accounting date
(1) The year of assessment for a person is the calendar year.
(2) The basis period of a person is,
(a) in the case of an individual or a partnership, the calendar year; and
(b) in the case of a company or a trust, the accounting year of the company or the trust.
(3) The CG may, on application by a trust or company, approve a change of
the accounting year of the trust or company on the terms and conditions that
the CG may approve.
(4) The CG may revoke an approval granted under subsection (3) if the trust
or company fails to comply with a condition attached to the approval.
(5) A change in the accounting year of a trust or company alters the time at
which the trust or company is required to pay tax by instalments and on
assessment under Part VIII.
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PRACTICE NOTE ON CHANGE OF ACCOUNTING YEAR
Practice Note Number: DT /2016 /007
Date of Issue: 6th October, 2016
Paragraph 4.2- Conditions for Approval of Change of Accounting
Year
a) The Trust or Company must first apply to the CG in writing for
approval prior to a change in the accounting year.
b) The Trust or Company must specify in the application indicated in
(a) above:
(i) how it intends to deal with the transitional period between the “old
Accounting year” and the “new Accounting year” to ensure that there is
no gap or revenue loss; and
(ii) the reasons for the required change in accounting year.
PRACTICE NOTE (CON’T)
There are a number of reasons why an entity may want to change its
accounting year. These reasons may include:
(i) the need to synchronize the accounting date of a subsidiary
with that of the holding company.
(ii) the convenience of stock taking at a particular period of the
year.
(iii) a business may take over the operation of another and as a
result may need to change the accounting date of the company
taken over to that of its own.
(iv)to conform to a regulatory provision.
PRACTICE NOTE (CON’T)
c) The Trust or Company should have filed all relevant returns up
to the old accounting date and also to the new accounting date.
This is to avoid any revenue gaps.
d) The Trust or Company must have settled all taxes, interest, or
penalties due or must have made satisfactory arrangement with
the CG to settle the outstanding debts (if any).
e) All Directors of the Trust or Company should have filed and
paid all Relevant taxes.
The Commissioner-General may revoke an approval granted, if
the Trust or Company fails to comply with conditions attached to
the approval.
ANTI-AVOIDANCE PROVISIONS (CON’T)
RING FENCING
Generally, Ring fencing requires separation of
Business income from investment income
o Section 2(2) and 3(4) of Act 896
Multichoice Ghana Limited v Commissioner, Internal Revenue Services
o Section 63(4) of Act 896 – separate petroleum operation for petroleum
contractors
o Section 77(4) of Act 896 – separate mining operation for mining companies
Unrelieved loss from a business utilised against unrelieved loss from an
investment
o Loophole in Act 896
o Unrelieved loss from business can be utilised against income from investment-
section 17(4) of Act 896
o Policy over focused on the ruling in Multichoice – disallowance of investment
loss against business income 33
o Harrison’s (supra) dividend stripping arrangement is likely to be successful
under Act 896
ANTI-AVOIDANCE PROVISIONS(CON’T)
Section 27- Indirect payments
(1) Subsection (2) applies where a person
(a) indirectly benefits from a payment; or
(b) directs that another person is to be the payee of a payment and the
payer intends the payment to benefit the person who gave the
directive.
(2) Where subsection (1) applies, the CG may,
by practice note or by notice in writing served on the person,
(a) treat that person as the payee of the payment;
(b) treat that person as the payer of the payment; or
(c) treat the person as the payee of the payment and as making an
equal payment to the person who would be considered the payee of
the payment if this subsection were ignored.
34
INDIRECT PAYMENTS (CON’T)
35
ANTI-AVOIDANCE PROVISIONS(CON’T)
Section 31-Arm’s length standard (Transfer Pricing)
Transfer pricing manipulations take place between related companies.
This applies for both domestic and international transactions
Market Price (arm’s length price) v transfer price
31(4) Where in the opinion of the CG a person has failed to comply with
subsection (1), ie arm’s length standard, the CG may make adjustments
consistent with subsection (2).
(5) The CG may, in carrying out an adjustment in subsection (4),
(a) re-characterise an arrangement made between persons who are in a
controlled relationship, including re-characterising debt financing as equity
financing;
(b) re-characterise the source and type of any income, loss, amount or
payment; and
(c) apportion and allocate expenditure, including the activities specified in
section 107 (2) based on turnover. 36
ARM’S LENGTH STANDARD (TRANSFER
PRICING) CON’T)- SECTION 31
Challenges of the CG
Informationasymmetry
Lack of comparable
Transfer Pricing Regulations, 2020 (L.I. 2412)
Comparable Uncontrolled Price Method
Cost Plus Method
Resale Price Method
Transactional Profit Split Method
Transactional Net Margin Method
37
TRANSFER PRICING (CON’T)
TP documentation required to be kept
contemporaneously
Goods
Loans
Services
Intellectual property
TP return filing required- 4 months after the end of the
accounting peroid.
TP can occur in domestic transactions or international 38
transactions
TRANSFER PRICING (TP) – HYPOTHETICAL –
INTERNATIONAL TRANSACTIONS
PS: All the companies are related
Cayman Islands Mauritius
CIT rate – @ 0% CIT Rate - @
Dividend - @ 0% 20%
Dividend – @
UK Co 0% B
- Arm’s length trading
A Shifting of profits ($1,800,000 -
with Ghana Co
- Tax rate in UK – @ 40%
C
max) from Ghana
left only $200,000 to tax
Ghana Co • The payments for A, B, and C may not
o Has taxable profit of reflect the commercial values or may even
$2,000,000
o CIT Rate - @ 25%
be non-existent economic transaction
o Dividend Rate 8% • The main purpose of the flow of transaction
Cayman Island and Mauritius are low or no tax jurisdiction was to shift profit
Motivation for related parties to reduce their ETR
PS:
A – Management services of $1,200,000 CG is empowered under TP
B – Royalty payment of $500,000
C – Supply of goods of $100,000
rules to recharacterize or
disregard the arrangements
ANTI-AVOIDANCE PROVISIONS(CON’T)
Section 32-Income Splitting
Income splitting involves a scheme where a person artificially assigns
income to another person in order to reduce tax liability of the assignor.
For individuals, the income tax rates in the First Schedule, as amended
by Section 1 of the Income Tax (Amendment) Act, 2019 (Act 1007) is a
graduated rate which simply means income which places a person in a
high income bracket, there is an incentive to split the income and assign
a portion to a person in of a low income bracket in order to reduce tax
liability on the entire amount.
To defeat this anti-avoidance the Act provides that the CG may, by
notice in writing to that person, prevent a reduction in tax payable. CG
may, in the notice referred to above
adjust the amount to be included in or deducted from income for the
purpose of calculating the income of each person; or
re-characterise the source and type of any income, loss, amount or 40
payment.
INCOME SPLITTING (CON’T)
Section 32 of Act 896 - Usually occurs between related parties or
associated person
Transfer of income or asset
Transferor retains the legal right in the transferred asset
Results in lower tax payable by an associated party
Hypothetical Illustration in the
Aker Oil Services Limited (AO) – upstream oil and gas industry Aker Energy Ghana Limited (AE) –
Petroleum Subcontractor Petroleum Contractor
o CIT Rate is 5% - final tax per PA
o The fixed assets are therefore non- CIT Rate: 35%
ts
beneficial in terms of capital allowance a sse
(CA) claim f fi xed AO
e r o b y AO & AE are related parties
nsf d
Tra ta ine Assets transfer will help AE
e
tit le r claim CA to reduce taxable
al
Leg income
Group’s ETR reduced
CG is empowered under
disregard the arrangements
ANTI-AVOIDANCE
PROVISIONS(CON’T)
Thin Capitalisation- Section 33
Busnesses can be financed by either debt or equity, or a
combination of both.
Debt-equity ratio has a lot of tax implications.
Interest on the debt is an allowable deduction, while dividend
paid shareholders (equity) is not an allowable deduction.
The company pays corporate tax while shareholders also pay tax
on their dividends.
It means when one finance your business with equity, one is
exposed to the payment of more taxes than when debt financing
is used.
In order to avoid payment of tax, companies prefer using more
debt to equity. This has led to the development of thin
capitalisation rules. 42
In Ghana, the debt-to-equity ratio is 3:1
THIN CAPITALISATION – CON’T
Only applicable to related party loans
Related party must hold at least 50% - direct or indirect
ownership
The Provider of the loan must either be
Non-resident; or
Resident that is exempt from tax
The rule is not applicable to loans to financial institutions
43
ANTI-AVOIDANCE
PROVISIONS(CON’T)
General anti-avoidance rule- Section 34
For purposes of determining a tax liability under this Act, the CG
may re-characterise or disregard an arrangement that is entered
into or carried out as part of a tax avoidance scheme
(a) which is fictitious or does not have a substantial economic effect; or
(b) whose form does not reflect its substance.
“tax avoidance” includes an arrangement, the main purpose of
which is to avoid or reduce tax liability.
Fan Milk Ltd v CG (Suit No CM/TAX/0004/18 Unreported)
The CG re-characterised “discounts” as "commissions” and
surcharged Fan Milk to pay withholding tax of GHS7,655,676.22
44
GENERAL ANTI-AVOIDANCE RULE- CON’T
In the case of Eaton Towers Ghana Limited v Commissioner-
General of the Ghana Revenue Authority, the courts applied the
general anti-avoidance principle to uphold imposition of tax benefit
gained by an arrangement between appellant and Vodafone Ghana
Limited.
The Court held that the CG has the power to re-characterise the
arrangement the purpose of which led to 25% reduction in fee payable
under the arrangement between the appellant and Vodafone Ghana Ltd
In the said case, Vodafone carved-out is towers business to the appellant
under an arrangement where the appellant rented masts to Vodafone at a
lower price relative to what the latter’s competitors – MTN and the like
paid. The respondent determined that the arrangement was as part of a
tax avoidance scheme with the object of underpaying income tax and
VAT. Thus, had a normal price being charged by the appellant, it would
45
have resulted in higher assessed VAT and income tax.
ANTI-AVOIDANCE PROVISIONS(CON’T)
Change in ownership- Section 62
(1) Where the underlying ownership of an entity changes by more
than 50 percent at any time within a period of three years, the assets
and liabilities of that entity immediately before the change is
deemed to be realised.
(2) An entity that changes ownership in the manner referred to
above, shall not
deduct financial costs carried forward under section 16(3) that were
incurred by the entity before the change
deduct a loss under section 17(1) that was incurred by the entity
before the change;
claim a deduction under section 23 (2), (4) or (5) after the change,
in a case where the entity has included an amount in calculating
income under those provisions before the change; or
46
carry back a loss under section 24(6) that was incurred after the
change to a year of assessment before the change
ANTI-AVOIDANCE PROVISIONS(CON’T)
Temporary concession- Section 134 (5) and 6th
Schedule
For the purposes of this Act, where a provision of the Sixth
Schedule applies to grant a concession to a person with respect to
a particular type of business
the business is construed narrowly and only the person’s
activities devoted wholly, exclusively and necessarily to that
business are treated as part of the business
the income gained by a person or loss incurred by a person from
the business for a year of assessment is calculated separately
from any other activity of the person; and
an unexpired period granted under the concession shall be treated
as having been transferred to a new owner of the business in case
47
of transfer of ownership of the business and that concession shall
not commence with the new ownership.
DEEMED DIVIDEND- SECTION 59(5) OF ACT 896
DD arises in 2 situations:
Capitalisation of profit; or
None-declaration of dividends of close company ( controlled
by not more than 5 persons)
CG empowered under section 59(5) of Act 896 to deem any part
of the profits as dividends and apply appropriate taxes
CG shall give consideration to the following prior to his
determination
o Current business requirements of the company
o Maintenance and business development needs of the
48
company
“I REALLY THINK A CHAMPION IS DEFINED NOT
BY THEIR WINS BUT BY HOW THEY CAN RECOVER
WHEN THEY FALL.” – SERENA WILLIAMS
49
QUESTIONS, COMMENTS,
CONTRIBUTIONS
