Identify the type(s) of Advance Pricing Agreement (APAs)?
Correct Answer:
(D)
All of the above
An APA is a formal arrangement between a taxpayer and a tax authority on transfer prices. APAs allow businesses to reduce the risk of their transaction prices being challenged by tax authorities.
Types of APAs:
Unilateral APAs: Limit risks for transactions between domestic entities. No guarantee of avoiding double taxation for transactions with foreign entities.
Relatively shorter proceedings compared to other APA types.
Bilateral APAs: Limit risks for transactions between a domestic entity and a foreign entity. Eliminate the risk of double taxation. Longer proceedings as two states must agree.
Multilateral arrangements: They mitigate risks for transactions between related entities in 3 or more states, serving as a protective instrument for complex transactions and ensuring safety for both parties, although the proceedings take longer.
Ques:
32
Among the following options, which of these is a capital receipt?
Correct Answer:
(B)
Disinvestment
Among the options provided, disinvestment is a capital receipt because it involves the sale of government assets, which reduces the government's assets. Capital receipts refer to those receipts that either decrease assets or raise liabilities. Disinvestment causes asset depreciation.
Ques:
33
Consider the following statements regarding Revenue receipts:
Such receipts do not lead to a claim on the government.
They are non-redeemable.
Which of the statements given above is/are correct?
Correct Answer:
(C)
Both 1 and 2
Revenue receipts are those receipts that do not lead to a claim on the government. They are hence termed non-redeemable. They are classified into tax and non-tax revenues.
Ques:
34
Consider the following statements:
The government also gets money in terms of loans or from the sale of its assets.
The sale of government assets is known as Public Sector Undertakings disinvestment.
Which of the statements given above is/are correct?
Correct Answer:
(C)
Both 1 and 2
The government also gets money in terms of loans or from the sale of its assets. Loans must be given back to the agencies from which they have borrowed. Hence, they establish liability. The sale of government assets, such as the sale of shares in Public Sector Undertakings (PSUs) that is known as Public Sector Undertakings disinvestment, minimises the total amount of financial assets of the government.
Ques:
35
All the receipts of the government that establish liability or minimise financial assets are known as:
Correct Answer:
(A)
Capital receipts
When the government sells an asset, it is understood that its earnings from that asset will vanish in the future. Hence, these receipts can be debt establishing or non-debt establishing. All the receipts of the government that establish liability or minimise financial assets are known as capital receipts. When the government takes loans, it means that these loans will have to be given back and interest will have to be financed on these loans in the future.
Ques:
36
Which of the following statements is true about the fiscal deficit?
Correct Answer:
(C)
It is the difference between the total expenditure and receipts of a government excluding borrowings
Fiscal deficit occurs when a government's total expenditure exceeds its total revenues in a particular financial year, excluding the money it acquires by borrowing. Also known as Gross Fiscal Deficit, it occurs in situations when a government spends more money than it earns from revenues.
Ques:
37
Consider the following statements:
General Anti Avoidance Rules (GAAR) is an anti-tax avoidance law to avoid tax leaks.
The GAAR provisions come under the Income Tax Act, 1961.
Which of the statements given above is/are correct?
Correct Answer:
(C)
Both 1 and 2
It is an anti-tax avoidance law in India to curb tax evasion and avoid tax leaks.
It came into effect on 1st April 2017. The GAAR provisions come under the Income Tax Act, 1961.
GAAR is a tool for checking aggressive tax planning, especially those transactions or business arrangements that are entered into with the objective of avoiding tax.
Ques:
38
Consider the following statements:
GAAR assists in tackling particular tax avoidance schemes on a case-by-case basis.
GAAR is meant to apply to transactions that are prima facie legal, but result in tax reduction.
Which of the statements given above is/are correct?
Correct Answer:
(B)
2 only
GAAR is general and it is aimed at targeting tax avoidance broadly. However, SAAR is specific and it assists in tackling particular tax avoidance schemes on a case-by-case basis
GAAR is specifically aimed at cutting revenue losses that happen to the government due to aggressive tax avoidance measures practiced by companies. It is meant to apply to transactions that are prima facie legal, but result in tax reduction.
Ques:
39
Consider the following statements:
1. In India, the provisions of General Anti-Avoidance Rule (GAAR) will be implemented with effect from 1 April 2015.
2. The provision of GAAR were aimed at checking tax avoidance by overseas investors.
Which of the statements given above is/are correct?
Correct Answer:
(B)
2 only
The General Anti-Avoidance Rule (GAAR) in India was initially proposed to be implemented from 1 April 2015. However, the implementation of GAAR was deferred, and it was eventually implemented from 1 April 2017.
GAAR provisions are aimed at curbing tax avoidance practices, particularly those involving complex arrangements that lack commercial substance.
These rules are designed to target transactions or arrangements that are primarily aimed at obtaining tax benefits.
Overseas investors, among others, are subject to GAAR provisions if their transactions are found to be primarily for tax avoidance purposes.
Ques:
40
Which of the following statements are correct in the context of the provisions stated by the Shome committee report on GAAR?
1. GAAR should apply “only in cases of abusive, contrived and artificial arrangements”.
2. It proposed to do away with short-term capital gains tax by increasing the transaction tax.
Which of the statements given above is/are correct?
Correct Answer:
(C)
Both 1 and 2
GAAR should apply “only in cases of abusive, contrived and artificial arrangements”, the Shome panel suggested that the I-T Act may be amended to provide that only arrangements which have the main purpose (and not one of the main purposes) of obtaining tax benefit should be covered under GAAR. So, statement 1 is correct.
It proposed to do away with short-term capital gains tax by increasing the transaction tax. In order to make the proposal tax neutral, the government may consider increasing the rate of Securities Transaction Tax (STT) appropriately. So, statement 2 is correct.