CMA Final Direct Tax Laws and International Taxation Flashcards

24 sample cards from the Direct Tax Laws and International Taxation deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What constitutes an 'Associated Enterprise' under Section 92A?

   Two enterprises are associated if one participates directly/indirectly in the management, control or capital of the other, or the same persons do so for both. Section 92A(2) lists deeming criteria, e.g., holding 26% or more voting power, or advancing loans ≥51% of book value of assets.

2. What are the prescribed methods for computing 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.

3. What is a 'Specified Domestic Transaction' under Section 92BA for transfer pricing?

   It is a transaction (other than an international transaction) between related domestic parties exceeding an aggregate value of Rs 20 crore in the year, such as certain payments to related persons and transactions of tax-holiday units, subject to arm's length scrutiny.

4. What is an Advance Pricing Agreement (APA) under Sections 92CC and 92CD?

   An APA is an agreement between the taxpayer and CBDT determining the arm's length price or methodology for future international transactions, valid for up to 5 years (with rollback for 4 prior years), providing certainty and avoiding TP disputes.

5. What are the three tiers of Transfer Pricing documentation under Section 92D (BEPS Action 13)?

   Master File (group-level information), Local File (entity-level transaction details), and Country-by-Country Report (CbCR) filed by large MNE groups (consolidated revenue threshold Rs 6,400 crore) reporting global allocation of income and taxes.

6. What is 'Equalisation Levy' and at what rate does it apply to online advertising services?

   Equalisation Levy is a levy on certain digital transactions to tax e-commerce. It applies at 6% on payments exceeding Rs 1 lakh/year by a resident/PE to a non-resident for specified online advertisement services.

7. What is 'Significant Economic Presence' (SEP) under Section 9(1)(i) and its relevance to e-commerce taxation?

   SEP deems a business connection in India for a non-resident based on revenue from transactions in goods/services/data with India exceeding prescribed thresholds, or systematic solicitation of users beyond a prescribed number, enabling taxation of digital businesses without a physical PE.

8. What is the TDS provision under Section 194-O for e-commerce transactions?

   An e-commerce operator must deduct TDS at 0.1% (1% pre-revision) on the gross amount of sale of goods/services facilitated through its digital platform for an e-commerce participant, credited/paid at the time of credit or payment.

9. What was the scope of the Equalisation Levy of 2% on e-commerce supply (and its current status)?

   The 2% equalisation levy applied to consideration received by a non-resident e-commerce operator for online supply of goods/services to Indian residents/IP-address users. It was abolished w.e.f. 1 August 2024 (advertising EL of 6% continued before later changes).

10. What is a 'Self-Assessment' under Section 140A?

    Before filing the return, the assessee must compute total income, calculate tax due after TDS/TCS/advance tax/relief, and pay the balance tax along with interest and fee. This payment is self-assessment tax under Section 140A.

11. What is 'Summary Assessment' / processing of return under Section 143(1)?

    A preliminary, computerised processing of the return where total income is adjusted for arithmetical errors, incorrect claims apparent from the return, etc., and an intimation showing tax/refund payable is issued without detailed scrutiny.

12. What is 'Scrutiny Assessment' under Section 143(3)?

    A detailed assessment where, after issuing notice under Sec 143(2), the Assessing Officer examines the return, evidence and accounts to ensure income is not understated or excessive losses/deductions claimed, then determines the total income and tax by order.

13. What is 'Best Judgment Assessment' under Section 144?

    Where an assessee fails to file the return, comply with notices, or maintain accounts, the AO assesses total income to the best of his judgment based on available material (after giving an opportunity of being heard), determining tax accordingly.

14. What is 'Income Escaping Assessment' (Reassessment) under Sections 147-148?

    Where the AO has information suggesting income chargeable to tax has escaped assessment, he may, after issuing notice under Sec 148 (preceded by Sec 148A procedure), assess or reassess such income subject to prescribed time limits.

15. What is the time limit and procedure under Section 148A before issuing a reassessment notice?

    Before issuing a Sec 148 notice, the AO must conduct inquiry (if required), provide the assessee an opportunity to explain via show-cause within 7-30 days, consider the reply, and pass an order under Sec 148A(d) deciding whether it is a fit case for reassessment.

16. What is 'Faceless Assessment' under Section 144B?

    A scheme eliminating the physical interface between taxpayer and tax authority, conducting assessments electronically through a National Faceless Assessment Centre with automated/random allocation, team-based review and dynamic jurisdiction to ensure transparency.

17. What is the penalty for under-reporting of income under Section 270A?

    Penalty for under-reporting is 50% of the tax payable on under-reported income; if the under-reporting results from misreporting (e.g., misrepresentation, false entries), the penalty is 200% of the tax on such income.

18. What is the penalty under Section 271H for failure to file TDS/TCS statements?

    Penalty ranges from Rs 10,000 to Rs 1,00,000 for failure to file TDS/TCS statements or for furnishing incorrect information; no penalty if the statement is filed within one year with fees and interest paid.

19. What is the penalty for failure to get accounts audited under Section 271B?

    Penalty equals 0.5% of total sales/turnover/gross receipts, subject to a maximum of Rs 1,50,000, for failure to get accounts audited or to furnish the audit report under Section 44AB.

20. Under Section 276C, what is the prosecution provision for wilful attempt to evade tax?

    Wilful attempt to evade tax, penalty or interest is punishable: if tax sought to be evaded exceeds Rs 25 lakh, rigorous imprisonment of 6 months to 7 years with fine; otherwise 3 months to 2 years with fine.

21. What is the penalty under Section 271C for failure to deduct or pay TDS?

    A penalty equal to the amount of tax that was not deducted or not paid may be levied for failure to deduct tax at source (or pay it under certain provisions), in addition to interest under Section 201.

22. What is the fee under Section 234F for late filing of return of income?

    A fee of Rs 5,000 is levied for filing the return after the due date; it is reduced to Rs 1,000 if the total income does not exceed Rs 5 lakh.

23. What is the purpose of a Tax Audit Report in Forms 3CA/3CB and 3CD under Section 44AB?

    Form 3CA (where accounts are audited under another law) or 3CB (otherwise) is the auditor's report, and Form 3CD is the detailed statement of prescribed particulars; together they ensure proper maintenance of books and correct reporting of income for tax purposes.

24. What is the difference between interest under Sections 234A, 234B and 234C?

    234A: interest at 1% per month for late filing of return. 234B: 1% per month for default/shortfall in payment of advance tax (less than 90% paid). 234C: 1% for deferment of advance tax instalments below prescribed percentages on due dates.

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Direct Tax Laws and International Taxation flashcards FAQ