mumbai the central board of direct taxes cbdt has attempted to allay fears of investors especially foreign by holding that where the relevant tax treaty sufficiently addresses the issue of tax avoidance then the general anti avoidance rule gaar provisions as contained in indias domestic tax laws will not apply tax experts aver that an element of subjectivity continues grandfathering from gaar shall also be available in respect of investments made prior to april 1 2017 including bonus on these shares or share split of original shares grandfathering inapplicability of gaar will also be available to instruments that are later convertible but according to terms finalised at the time of issuethe concept of treaty override where the beneficial tax provisions are ignored was a cause of concern for foreign investors gaar is set to kick in from april 1 in an exhaustive 16point faq released on friday cbdt has considered suggestions of a working committee set up in june 2016 to look into investors concerns its circular explains that adoption of antiabuse rules in tax treaties may not be sufficient to address all tax avoidance strategies thus these are required to be tackled through domestic antiavoidance rules such as gaar however if a case of avoidance is sufficiently addressed by a limitation of benefit lob clause in the tax treaty there shall not be an occasion to invoke gaarpunit shah partner dhruva advisors says there is still room for subjectivity in interpretation by the it authorities cbdt could have explicitly clarified that gaar will not apply where the conditions in specific antiavoidance regulations saar such as lob clauses in the tax treaty have been met instead one of the faqs also states that provisions of gaar and saar can coexistthe shome committee had earlier recommended that gaar should not apply to a tax treaty that has specific lob clauses for instance the lob clause in the revised tax treaty with mauritius provides that a mauritius investor will not be entitled to tax treaty benefits if the primary objective is to claim tax benefit second it adds that shell companies will also not be entitled to the benefit of a lower tax on capital gains during the transition period of two years commencing from april 1 a shell company is described as one when its total expenditure on operations in mauritius is less than rs 27 lakh in the previous 12 monthssudhir kapadia national tax head at ey india adds it would have been useful if specific tax treaties were cited where lob fulfilment would be adequate for inapplicability of gaarthere is some good news for offshore funds and portfolio investors as the faq explains that gaar shall not be involved merely because an entity is located in a taxefficient jurisdiction if the choice of the jurisdiction is based on nontax commercial considerations gaar will not apply the right of a taxpayer to choose a particular method of transaction has been protected from the applicability of gaar for example