CA Final PAPER 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION Syllabus

What is a 'faceless assessment' under section 144B?

A scheme of assessment conducted electronically without personal interface, through automated random allocation of cases, team-based assessment by the National Faceless Assessment Centre with units (assessment, verification, technical, review) to eliminate human discretion and bring transparency.

What is the difference between an appeal and a revision under the Income-tax Act?

An appeal (sections 246A–262) is filed by the assessee/department before appellate authorities (JCIT(A)/CIT(A), ITAT, High Court, Supreme Court) against an order. A revision (sections 263/264) is exercised by the Principal Commissioner/Commissioner—section 263 against orders prejudicial to revenue (suo motu) and section 264 in favour of the assessee.

What is the first appellate forum and the time limit to file an appeal under section 246A/249?

The first appeal lies to the Commissioner (Appeals) [or JCIT(Appeals)]. It must be filed within 30 days of the date of service of notice of demand or the order appealed against.

What is the time limit to file an appeal to the Income-tax Appellate Tribunal (ITAT) under section 253?

Within 60 days of the date on which the order sought to be appealed against is communicated to the assessee or the Commissioner.

What is the scope of section 263 (revision of orders prejudicial to revenue)?

The Principal Commissioner/Commissioner may, after examining records, revise an order of the Assessing Officer that is both erroneous and prejudicial to the interests of revenue, within 2 years from the end of the financial year in which the order was passed.

What is the Dispute Resolution Committee (DRC) under section 245MA?

A faceless DRC for 'small and medium' taxpayers, allowing resolution of specified disputes where returned income does not exceed Rs. 50 lakh and aggregate variation does not exceed Rs. 10 lakh. The DRC may reduce/waive penalty and grant immunity from prosecution.

What is an Advance Ruling and which body now issues it?

An advance ruling determines, in advance, the tax liability of a non-resident (or specified residents) on a proposed transaction, providing certainty. Rulings are now given by the Board for Advance Rulings (replacing the Authority for Advance Rulings).

What is the Mutual Agreement Procedure (MAP)?

MAP is a dispute resolution mechanism under tax treaties (Article 25 of DTAAs) allowing competent authorities of two countries to resolve disputes regarding interpretation/application of the treaty, particularly double taxation arising from transfer pricing adjustments, by mutual negotiation.

What is section 281 (certain transfers to be void) designed to counteract?

It counteracts attempts to defraud revenue—any transfer of assets by an assessee during pendency of proceedings, with the effect of defeating recovery of tax dues, is void against any tax claim, unless made for adequate consideration without notice or with prior permission of the AO.

How is undisclosed income covered under sections 68 to 69D taxed under section 115BBE?

Unexplained cash credits (68), investments (69), money (69A), unexplained expenditure (69C), etc., are taxed at a flat rate of 60% plus 25% surcharge and 4% cess (effective ~78%), with no deduction of any expenditure, allowance, or set-off of loss permitted.

What is section 271AAB penalty on undisclosed income found during search?

Penalty of 60% of the undisclosed income of the specified previous year found during a search initiated under section 132 (rate varies per amendment; substantively a steep penalty in addition to tax).

What is the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 about?

It taxes undisclosed foreign income and assets of residents at a flat 30% (no exemptions/deductions/set-off), imposes a penalty of 3 times the tax, and provides for prosecution with rigorous imprisonment, to combat black money stashed abroad.

What is the penalty for under-reporting and misreporting of income under section 270A?

Penalty of 50% of tax payable on under-reported income; and 200% of tax payable where under-reporting results from misreporting of income (e.g., misrepresentation, suppression of facts, false entries).

What is the penalty under section 271AAC on income referred to in sections 68–69D?

A penalty of 10% of the tax payable under section 115BBE, in addition to that tax, where such income is determined by the Assessing Officer (and not already included by the assessee and tax paid).

What is the offence and punishment under section 276C for wilful attempt to evade tax?

Where tax sought to be evaded exceeds Rs. 25 lakh: rigorous imprisonment of 6 months to 7 years with fine. In other cases: 3 months to 2 years with fine.

Who is required to get accounts audited under section 44AB (Tax Audit)?

A person carrying on business with turnover exceeding Rs. 1 crore (Rs. 10 crore if cash receipts/payments do not exceed 5%), or a profession with gross receipts exceeding Rs. 50 lakh, or those declaring lower profits than presumptive rates under 44AD/44ADA/44AE while exceeding basic exemption limit.

What are Forms 3CA/3CB and 3CD in tax audit?

Form 3CA (audit report where accounts already audited under another law) or Form 3CB (where not so audited) is the audit report; Form 3CD is the Statement of Particulars (detailed annexure) furnished along with the audit report.

What is the residential status test for a company under section 6(3)?

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

How is royalty/fees for technical services (FTS) paid to a non-resident taxed under section 115A?

Royalty and FTS received by a non-resident/foreign company from government or an Indian concern are taxed at 20% (plus surcharge and cess) on a gross basis, without deduction of expenses (rate per current Finance Act; treaty rate may apply if more beneficial).

What is the scope of 'business connection' under section 9(1)(i) including a dependent agent PE?

Income is deemed to accrue in India if there is a business connection—including where a person habitually concludes contracts, plays the principal role leading to conclusion of contracts, or habitually maintains a stock of goods from which deliveries are made on behalf of the non-resident.

What is the arm's length principle in transfer pricing (section 92)?

Income from an international transaction (or specified domestic transaction) between associated enterprises must be computed having regard to the arm's length price—the price that would apply between independent enterprises in uncontrolled comparable conditions.

List the methods for determining Arm's Length Price under section 92C.

Comparable Uncontrolled Price (CUP) method; Resale Price Method (RPM); Cost Plus Method (CPM); Profit Split Method (PSM); Transactional Net Margin Method (TNMM); and any other method prescribed by the Board.

What is an Advance Pricing Agreement (APA) under section 92CC?

An agreement between the CBDT and a taxpayer determining, in advance, the arm's length price (or the manner of its determination) for future international transactions, valid for up to 5 years, with a rollback option for up to 4 prior years (total certainty up to 9 years).

What is Thin Capitalisation / interest limitation under section 94B?

Interest paid by an Indian company/PE to a non-resident associated enterprise exceeding Rs. 1 crore is deductible only up to 30% of EBITDA; excess interest is disallowed but can be carried forward for up to 8 assessment years.

What is a Permanent Establishment (PE) under tax treaties?

A fixed place of business through which the business of an enterprise is wholly or partly carried on (e.g., branch, office, factory, mine). It is the threshold for taxing business profits of a non-resident in the source country. Types include fixed-place PE, construction PE, service PE, and agency PE.

What is the purpose of a Tax Residency Certificate (TRC) under section 90(4)?

A non-resident claiming treaty (DTAA) benefits must obtain a TRC from the government of the country of residence, and additionally furnish Form 10F, as proof of residence to be eligible for the relief.

What is the difference between exemption method and credit method of relief from double taxation?

Under the exemption method, foreign income is exempt in the residence country (taxed only in source country). Under the credit method, foreign income is taxed in the residence country but credit is given for tax paid in the source country (e.g., section 90/91 relief in India).

What is unilateral relief under section 91?

Where no DTAA exists with a country, a resident who has paid tax on doubly-taxed foreign income gets relief at the lower of the Indian rate of tax or the foreign rate of tax on that doubly-taxed income.

What is the Multilateral Instrument (MLI) and the Principal Purpose Test (PPT)?

The MLI is an OECD multilateral convention that modifies existing bilateral tax treaties to implement BEPS measures. The PPT denies treaty benefits if obtaining that benefit was one of the principal purposes of an arrangement/transaction, unless granting it accords with the object and purpose of the treaty.

How is dividend received by a domestic company eligible for deduction under section 80M?

A domestic company can deduct dividend received from another domestic company, foreign company, or business trust to the extent it distributes such dividend to its shareholders on or before the due date (one month prior to the date of filing return), avoiding cascading taxation.

What is the tax treatment of buy-back of shares for tax planning post-October 2024?

From 1.10.2024, buy-back proceeds are taxed in the hands of the shareholder as deemed dividend (income from other sources); the earlier company-level buy-back distribution tax under section 115QA was withdrawn. The shareholder's cost of acquisition is treated as a capital loss.