CA (Chartered Accountancy) Final: Direct Tax, International Taxation and Indirect Tax Laws Syllabus

What is the appellate hierarchy for income-tax disputes?

(1) Commissioner (Appeals) / Joint Commissioner (Appeals), (2) Income Tax Appellate Tribunal (ITAT), (3) High Court (on substantial question of law, Sec 260A), (4) Supreme Court (Sec 261). Faceless appeal scheme applies at CIT(A) level.

Within what time must an appeal to the CIT(Appeals) and to the ITAT generally be filed?

Appeal to CIT(A) under Sec 249: within $30$ days of service of demand/order. Appeal to ITAT under Sec 253: within $60$ days of the order being communicated.

What penalty applies for under-reporting and misreporting of income under Section 270A?

Under-reporting of income: penalty of $50\%$ of tax payable on the under-reported income. Misreporting (e.g., suppression, false entries): penalty of $200\%$ of tax payable on the misreported income.

What is the penalty under Section 271H and Section 234E relating to TDS/TCS statements?

Sec 234E: late-filing fee of $\$200$ per day (capped at the TDS/TCS amount) for delayed statements. Sec 271H: penalty of $\$10{,}000$ to $\$1{,}00{,}000$ for non-filing or incorrect TDS/TCS statements.

Under Section 276C, what is the prosecution consequence of wilful attempt to evade tax?

Wilful attempt to evade tax where the tax sought to be evaded exceeds $\$25$ lakh: rigorous imprisonment of $6$ months to $7$ years with fine; in other cases, $3$ months to $2$ years with fine. Mens rea (wilfulness) is essential.

Differentiate tax planning, tax avoidance and tax evasion.

Tax planning: legitimate arrangement within the law to minimise tax (using available exemptions/deductions). Tax avoidance: using legal loopholes/colourable devices to reduce tax, may be hit by GAAR. Tax evasion: illegal concealment/misrepresentation, punishable by penalty and prosecution.

What is GAAR and what is an 'Impermissible Avoidance Arrangement'?

GAAR (General Anti-Avoidance Rules, Ch X-A, Secs 95-102) empowers tax authorities to deny benefits of an arrangement whose main purpose is to obtain a tax benefit and which lacks commercial substance, creates rights/obligations not at arm's length, or is carried out in a non-bona-fide manner.

What is the monetary threshold for invoking GAAR?

GAAR is invoked only where the aggregate tax benefit to all parties from the arrangement in the relevant year exceeds $\$3$ crore. Approval of an Approving Panel is required before applying GAAR.

What replaced the Income Tax Settlement Commission, and what is its role?

The Settlement Commission was discontinued (w.e.f. 01-02-2021) and replaced by the Interim Board for Settlement, which disposes of pending settlement applications. The Dispute Resolution Committee (DRC, Sec 245MA) offers resolution for small/eligible taxpayers.

Under Section 179 and Section 167C, who bears liability in special cases of companies and LLPs?

Sec 179: directors of a private company are jointly and severally liable for the company's unrecovered tax unless they prove no gross neglect/breach of duty. Sec 167C: partners of an LLP are jointly and severally liable for the LLP's tax that cannot be recovered.

What is Transfer Pricing and which transactions does it regulate?

Transfer pricing (Secs 92-92F) requires that income from an 'international transaction' between 'associated enterprises' be computed having regard to the Arm's Length Price (ALP), preventing profit shifting through non-arm's-length pricing.

What is a Specified Domestic Transaction (SDT) under Section 92BA?

An SDT is a specified transaction (not an international transaction) between related domestic parties—e.g., transactions referred to in Sec 80A, 80-IA(8)/(10), and certain 115BAB dealings—where the aggregate value exceeds $\$20$ crore in the year, subjecting them to ALP/transfer-pricing rules.

Define 'Associated Enterprises' for transfer-pricing purposes.

Two enterprises are associated (Sec 92A) if one participates directly/indirectly in the management, control or capital of the other, or the same persons so participate in both—e.g., holding $\geq 26\%$ voting power, advancing loans $\geq 51\%$ of book value of assets, or guaranteeing $\geq 10\%$ of borrowings.

List the five prescribed methods for determining the Arm's Length Price.

(1) Comparable Uncontrolled Price (CUP) Method, (2) Resale Price Method (RPM), (3) Cost Plus Method (CPM), (4) Profit Split Method (PSM), and (5) Transactional Net Margin Method (TNMM). The 'most appropriate method' is selected for each transaction.

What is the tolerance range/arithmetic mean rule when multiple ALP prices are determined?

If more than one price is determined, the ALP is the arithmetic mean of such prices. A tolerance band applies (presently $1\%$ for wholesale trading and $3\%$ for others); if the transaction price is within this band of the mean, no adjustment is made. Otherwise, the range concept/median is applied where dataset rules apply.

How is residential status determined for a company under Section 6(3)?

A company is resident in India if it is an Indian company, OR its Place of Effective Management (POEM)—the place where key management and commercial decisions necessary for the conduct of the business as a whole are in substance made—is in India during the year.

What is the scope of total income for a non-resident under Section 5?

A non-resident is taxed in India only on income that is received or deemed to be received in India, and income that accrues or arises or is deemed to accrue or arise in India (Sec 9). Foreign income with no India nexus is not taxed.

What are the two methods of granting double-taxation relief, and which sections govern them?

Bilateral relief under Sec 90/90A via a DTAA (using exemption or tax-credit method). Unilateral relief under Sec 91, where no DTAA exists, granting credit for foreign tax at the lower of the Indian or foreign rate on the doubly-taxed income.

How does a taxpayer claim the more beneficial of the DTAA or the Act, and what is required?

Under Sec 90(2), where a DTAA applies, the taxpayer may apply whichever of the DTAA or the Act is more beneficial. To claim treaty benefits, a Tax Residency Certificate (TRC) and Form 10F are required, and PAN where applicable.

Explain the Foreign Tax Credit (FTC) mechanism under Rule 128.

FTC is allowed in the year the corresponding income is offered to tax in India, equal to the lower of the foreign tax paid or the Indian tax on that income, computed source-by-source/country-by-country. Form 67 must be furnished on or before the return due date to claim FTC.

What is the Equalisation Levy and at what rates is it charged?

Equalisation Levy taxes certain digital transactions with non-residents: $6\%$ on online advertisement/related services payments (B2B, where annual payments exceed $\$1$ lakh). The $2\%$ levy on e-commerce supply/services has been withdrawn (abolished w.e.f. 01-08-2024).

What is 'Significant Economic Presence' (SEP) under Section 9?

SEP creates a business connection in India for non-residents based on digital/economic nexus: (a) transactions in goods/services/data with India exceeding a prescribed monetary threshold, or (b) systematic and continuous soliciting of business or interaction with a prescribed number of users in India—regardless of physical presence or agreement in India.

What does BEPS stand for and what is its core objective?

BEPS = Base Erosion and Profit Shifting. It is an OECD/G20 project addressing tax-planning strategies that exploit gaps and mismatches in tax rules to shift profits to low/no-tax locations. It comprises 15 Action Plans (e.g., Action 1 digital economy, Action 13 country-by-country reporting, Action 15 Multilateral Instrument).

Distinguish the OECD Model Convention from the UN Model Convention.

OECD Model favours residence-country taxation (suits capital-exporting/developed nations). UN Model gives greater taxing rights to the source country (favours developing/capital-importing nations), e.g., wider PE scope and source taxation of certain income. India's treaties draw on both.

Define 'Supply' under Section 7 of the CGST Act.

Supply includes all forms of supply of goods or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration in the course or furtherance of business, plus import of services for consideration, and activities in Schedule I (even without consideration).

What is a composite supply versus a mixed supply under GST?

Composite supply: two or more naturally bundled supplies with one principal supply—taxed at the rate of the principal supply. Mixed supply: two or more supplies bundled for a single price but not naturally bundled—taxed at the rate of the supply attracting the highest tax rate.

What is the charging section of GST and the basis of levy?

Sec 9 of the CGST/SGST Act (and Sec 5 of IGST Act) levy GST on intra-State/inter-State supplies of goods and services on the value determined under Sec 15, at notified rates. Tax on specified supplies is payable on reverse charge by the recipient.

State the Composition Levy turnover thresholds and rates under Section 10.

Available to suppliers with aggregate turnover up to $\$1.5$ crore ($\$75$ lakh for special-category states). Rates: manufacturers/traders $1\%$, restaurants (non-alcoholic) $5\%$, and a $6\%$ scheme for service providers with turnover up to $\$50$ lakh. Composition dealers cannot collect tax or claim ITC.

What are the four conditions for availing Input Tax Credit under Section 16?

(1) Possession of a tax invoice/debit note; (2) the goods or services have been received; (3) the supplier has actually paid the tax to the Government and the invoice appears in GSTR-2B; and (4) the recipient has furnished the return under Sec 39. Payment to the supplier must be made within $180$ days, else ITC is reversed.

How is ITC treated when goods are sent to a job worker under Section 19/143?

The principal can take ITC on inputs/capital goods sent to a job worker. Inputs must be received back or supplied from the job worker's premises within $1$ year, and capital goods within $3$ years (excluding moulds, dies, jigs, fixtures, tools); otherwise it is deemed a supply on the date the goods were sent out and tax becomes payable.

What is the order of utilisation of ITC across IGST, CGST and SGST?

IGST credit must be fully utilised first—against IGST, then CGST and SGST/UTGST in any order. CGST credit is used for CGST then IGST; SGST/UTGST credit is used for SGST/UTGST then IGST. CGST and SGST credits cannot be cross-utilised against each other.