CBDT,GAAR - Current Affairs Questions and Answers

ANSWER: Arbind Modi

Explanation:
The Union Finance Ministry has constituted task force to review Income Tax (IT) Act 1961 and draft new direct tax law in consonance with current economic needs.

CBDT member Arbind Modi will be convener of task force. Chief Economic Adviser Dr. Arvind Subramanian will be its permanent Special Invitee.

Terms of Reference of Task Force

Taskforce main mandate is to draft appropriate Direct Tax Legislation keeping in view direct tax system prevalent in various countries, international best practices.

It will also take into consideration, economic needs of country and any other matter connected thereto.

ANSWER: Both of the above

Explanation:
The Central Board of Direct Taxes (CBDT) on 22 May 2017 signed two Unilateral Advance Pricing Agreements (APA) with Indian taxpayers.

Among these two agreements, one also has a Rollback Provision.

The two APAs signed pertain to chip design and development of embedded software and Information technology sectors of the economy.

With the signing of these two APAs, the number of APAs signed in Financial Year 2017-18 is now four.

The progress of the APA Scheme is directly proportional to the Union Government’s commitment to foster a non-adversarial tax regime.

The APA Scheme was introduced in the Income-tax Act, 1961 in 2012 and the Rollback Provisions were introduced in 2014.

The scheme aims to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance for the maximum of five future years.

Further, the taxpayer has the option to roll-back the APA for four preceding years, as a result of which, total nine years of tax certainty is provided.

Since its inception, the APA scheme has showcased a lot of interest from taxpayers that has resulted in filing of over 700 applications in about five years.

ANSWER: Both a and b

Explanation:
Senior bureaucrats Ajit Kumar Srivastava and Shabri Bhattasali were on April 11, 2017 appointed members of Central Board of Direct Taxes (CBDT).

This is the apex policy making body of the Income Tax department.

The role of the CBDT is to provide inputs for policy and planning of direct taxes in the country and the statutory authority also administers the direct tax laws through Income Tax Department.

The CBDT functions under the Central Board of Revenue Act, 1963.

It functions like the Financial Action Task Force (FATF), which combats money laundering and black money, and was formed by the G7 in 1989.

Srivastava and Bhattasali are Indian Revenue Service (Income Tax cadre) officers of 1980 and 1981 batch respectively.

The Appointments Committee of the Cabinet has approved their appointment as Members, CBDT, an order issued by Department of Personnel and Training said.

CBDT: Know More

• The role of the CBDT is to provide inputs for policy and planning of direct taxes in the country.
• It is the statutory authority which also administers the direct tax laws through Income Tax Department.
• The CBDT functions under the Central Board of Revenue Act, 1963.

ANSWER: April 1, 2017

Explanation:
The Union Finance Ministry has announced that the General Anti Avoidance Rule (GAAR) will be effective from the 1 April, 2017.

In this regard Income Tax (IT) department has issued a slew of clarifications on implementation of GAAR.

It is seeking to address concerns of foreign investors over implementation of the anti-evasion measure.

GAAR seeks to prevent companies from routing transactions through other countries. It prevent attempts to avoid taxes.

The rules are framed mainly to minimize and check avoidance of tax.

India will be the 17th nation in the world to have laws that aim to close tax loopholes.

At present, GAAR is in force in nations like Australia, Singapore, China and the UK.

GAAR seeks to give the IT department powers to scrutinize transactions structured in such a way as to deliberately avoid paying tax in India.

It will not be invoked in cases where investments are routed through tax treaties that have a sufficient limitation of benefit (LOB) clause to address tax avoidance.

LOB clause in tax treaties generally requires investors to meet certain spending and employment criteria to avail the benefits of the treaty.

All transactions or arrangements approved by courts and quasi-judicial authorities for tax

will not be subject to the GAAR test.

GAAR will not be applicable on compulsorily convertible instruments, bonus issuances or split/consolidation of holdings in respect of investments made prior to 1 April 2017 in the hands of the same investor.

Adequate safeguards also have been put in place based on which GAAR will be invoked.

The proposal to apply GAAR first will be vetted by an officer at the level of the principal commissioner.

It can also be vetted by commissioner of income tax.

At the second stage by an approving panel headed by a high court judge. GAAR will not apply on foreign portfolio investor if its jurisdiction is based on non-tax commercial considerations and the main purpose is not to obtain tax benefits.

ANSWER: Advance Pricing Agreements

Explanation:
CBDT started 2017 on a good note with 3 unilateral Advance Pricing Agreements, taking the tally of APAs of the country to 120.

The three APAs signed on Jan 4, 2017 related to the engineering goods and shipping sectors of the economy. The international transactions covered in these agreements include intra-group services and support services, an official release said.

Of these 120 APAs, 7 were bilateral and 114 unilateral. A total of 56 APAs (4 bilateral and 52 unilateral) have been entered into in the current financial year till date.

APAs: Know More

• The APA Scheme was introduced in the Income-Tax Act in 2012 and the “rollback” provisions were introduced in 2014.
• The scheme aims to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.
• Since its inception, the APA scheme has evinced a lot of interest from taxpayers and that has resulted in more than 700 applications (both unilateral and bilateral) being filed in just four years.
• The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime.
• The Indian APA programme has been appreciated nationally and internationally.
• It is known for being able to address complex transfer pricing issues in a fair and transparent manner.
• An APA is usually signed between taxpayer and central tax authority of the country (in case of India CBDT) for appropriating transfer pricing methodology.
• It is used to determine the value of assets and taxes on intra-group overseas transactions.

ANSWER: E-nivaran

Explanation:
CBDT on 8th September 2016 launched the electronic resolution facility or e-nivaran facility for online redressal of taxpayer’s grievances.

• Grievances can be related to refunds, Income tax returns, Tax Deducted at Source and Permanent Account Number among others.
• The scheme/facility has been started with the aim to reduce instances of harassment of the public for filing IT department complaints
• It will be available on the e-filing portal (http://incometaxindiaefiling.gov.in) of the department.
• It will help taxpayers in registering complaints through the computer and receive special PIN number on their registered mobile number and email which keeps track on latest issues
• Complainant also tracks the progress of complaint through this
• People can lodge complaints and upload documents in the form of PDF file clubbed as ZIP file
• People who lack a PAN card can access the e-nivaran facility and lodge their complaints in connection with IT case
• The form for e-nivaran will also be available in physical form at the Aaykar Sampark Kendras (ASK) (tax facilitation centre), located in over 300 cities.
• Later, the form will be fed into the system by tax officials.

ANSWER: Advance Pricing Agreement

Explanation:
Central Board of Direct Taxes has entered into a Bilateral Advance Pricing Agreement on 2nd August 2016 with an Indian subsidiary of the Japanese trading company.

• This marks the first Bilateral APA with a Japanese company having a rollback provision.
• Overall, it is the fourth bilateral APA signed by CBDT and signing of this bilateral APA helps in ascertaining certainty in transfer pricing matters of MNC cases and dispute resolution.
• APA scheme was introduced as per the Income Tax Act in 2012 and the Rollback provisions were introduced in 2014

ANSWER: before

Explanation:
Central Board of Direct Taxes has decided that for tax purposes, a person would be deemed to have attained a certain age on the day preceding their birthday rather than the birthday itself.

• The issue is vital for those turning 60 to 80 years of age on April 1, since these two ages bring income tax exemptions with them applicable to senior and very senior citizens.
• CBDT in exercise of powers under section 119 of the Act holds that person born on April 1 would have been considered to attain a particular age on March 31, the day proceeding the anniversary of his or her birthday.
• Individuals will now benefit from senior citizen exemptions in the year they turn 60 rather than in the next year.

ANSWER: Foreign Tax Credit

Explanation:
Central Board of Direct Taxes has proposed foreign tax credit rules to assist corporates. For providing relief to corporates with income abroad, simplified Foreign Tax Credit rules were introduced. These have been formulated to help companies claim credit for taxes paid overseas.

• CBDT said tax credit can be availed by entities paying taxes in the nation including those with Double Taxation Avoidance Agreement.
• Foreign tax credit will be determined by conversion of currency of payment of foreign tax at telegraphic transfer buying are on dates when the tax has been paid or deducted

ANSWER: 6-8%

Explanation:
Panel says equalisation levy of 6-8 percent on digital transactions is for business to business deals for e-commerce companies. Report also suggested introduction of tax based on BEPS or Base Erosion and Profit Sharing earlier endorsed by G20 and OECD. The CBDT committee also suggested equalisation levy be imposed on amount paid to non resident by Indian resident for specified digital services. It also indicates the Levy should not be part of the Income Tax Act.