CA Final International Taxation MCQs – Double Taxation Relief answers with detailed explanations are given at the end of questions. The pattern of CA Final International Taxation question paper is 30% objective and 70% descriptive under the Old and New Schemes.
1. Source rule of taxation provides that income is to be taxed :-
a) In the country of residence of taxpayer
b) In the country in which such income originates
c) Both A and B
d) None of the above
2. Residence rule provides that income is to be taxed in the country:-
a) Where the recipient of income is a resident
b) Where it originates
c) Both A and B
d) None of the above
3. Double taxation relief could be :-
a) Bilateral Relief
b) Unilateral Relief
c) Multilateral Relief
d) Both A and B
4. Bilateral relief means a relief in which :-
a) Home country of the taxpayer provides tax relief, where no mutual agreement has been entered into by the two countries for providing relief from double taxation
b) Governments of two countries, enter into an agreement to provide relief against double taxation on mutually agreed basis
c) Both A and B
d) None of the above
5. Unilateral relief means a method of providing relief from double taxation in which :-
a) Home country of the taxpayer provides tax relief, where no mutual agreement has been entered into by the two countries for providing relief from double taxation
b) Governments of two countries, enter into an agreement to provide relief against double taxation on mutually agreed basis
c) Both A and B
d) None of the above
6. Bilateral relief could be provided by way of :-
a) Credit Method
b) Exemption Method
c) Both A and B
d) None of the above
7. In Exemption Method :-
a) Income is taxed in the Country of source and Country of Residence and deduction is provided in other Country
b) Income is taxed in one Country and exempt from tax in the other Country
c) Both A and B
d) None of the above
8. In Tax Credit method :-
a) Income is taxed in Country of source and Country of Residence and deduction is provided in other Country
b) Income is taxed in one Country and exempt from tax in the other Country
c) Both A and B
d) None of the above
9. Central Government may enter into an agreement, with the Government of any country outside India u/s 90 for grating relief in respect of :-
a) Income, where income-tax has been paid both in India and in country of residence of taxpayer
b) Income on which Income-tax is chargeable under the IT Act and under the corresponding law in force in that country
c) Both A and B
d) None of the above
10. Where an assessee is eligible to claim the DTAA benefit :-
a) Provisions of DTAA shall apply to the assessee
b) Provisions of Income-Tax Act shall apply to the assessee
c) Provisions of DTAA or Income-Tax Act, whichever is more beneficial, shall apply to the assessee
d) None of the above
CA Final International Taxation MCQs – Double Taxation Relief
11. Zodaphone Incl. is located in Country Z, and it is liable to pay Indian Income-Tax on its interest income arising from India. Rate of tax on such interest income is 10% under DTAA and 20% under the Income-Tax Act. Zodaphone is liable to pay tax @ :-
a) 10%
b) 20%
c) 0%
d) None of the above
12. Where an assessee is eligible to claim DTAA benefit, on a particular income and GAAR is applicable on such case then taxation of such income shall be decided on basis of provision of :-
a) DTAA
b) GAAR
c) DTAA or Income-Tax Act, whichever is more beneficial
d) None of the above
13. A foreign company is deriving income from India. However, there is no DTAA with the Country in which Foreign Company is located. The rate of taxation of Indian income derived by foreign company shall be decided on the basis of :-
a) Provisions of DTAA
b) Provisions of Income-Tax Act
c) Provisions of DTAA or Income-Tax Act, whichever is more beneficial
d) Local Laws of country in which foreign company is located
14. Tax Residency Certificate is required :-
a) To claim DTAA relief
b) To claim credit of withholding taxes
c) To claim foreign tax credit
d) All of the above
15. In order to claim DTAA relief, non-resident is required to furnish :-
a) Tax Residency Certificate
b) Form 10F
c) PAN
d) Both A and B
16. An Indian company avails technical services from Yavoo Inc. (USA). Such income is taxable u/s 9(1)(vii) of the IT Act @ 10%. However, it is exempt from tax under Article 12 of India-USA DTAA. Indian company is required to withhold tax @ :-
a) 10%
b) 0%
c) 10% plus education cess
d) None of the above
17. Section 90A Agreement referred to by any specified association in India with specified association in the specified territory outside India, can be for –
a) Grant of double taxation relief,
b) Avoidance of double taxation of income,
c) Exchange of information for the prevention of evasion or avoidance of income – tax
d) All of the above
18. AZV association is eligible to claim Section 90A benefit due its agreement with X Association in the specified territory outside India which is notified by Central Government. In this case, payment made to X association would be taxable at –
a) Rate provided in DTAA
b) Rate provided in Income-Tax Act
c) Rate provided in DTAA or Income-Tax Act, whichever is less
d) Rate provided in DTAA or Income-Tax Act, whichever is more
19. For the purpose of claiming Section 90A benefit :-
a) There is a requirement to furnish Tax Residency Certificate
b) There is a requirement to furnish Form 10F
c) Both A and B
d) None of the above
20. If a person resident in India has paid tax in any country with which no DTAA (treaty) exists, then, for the purpose of relief or avoidance of double taxation, Section 91 provides a :-
a) Deduction from the Indian income-tax payable by him
b) Exemption of tax paid outside India
c) A or B, whichever is more beneficial
d) None of the above
CA Final International Taxation MCQs – Double Taxation Relief
21. Where any income arises to resident outside India, and there is no DTAA which exists with such Country, then deduction would be granted under Section 91 when :-
a) Assessee has been subjected to income-tax on such income in foreign country and has paid tax thereon in foreign country
b) Assessee has Tax Residency Certificate
c) Both A and B
d) None of the above
22. Section 91 specifies that if a person resident in India has paid tax in any country with which no DTAA (treaty) exists, then, for the purpose of relief or avoidance of double taxation, a deduction is allowed from income-tax payable by him, of a sum calculated on such doubly taxed income :-
a) At Indian rate of tax
b) At Rate of tax of such foreign country
c) At Indian rate of tax or the rate of tax of such foreign country, whichever is lower
d) At Indian rate of tax or the rate of tax of such foreign country, whichever is higher
23. Any, resident in India, who has agricultural income in Pakistan, and has paid tax in Pakistan (by deduction or otherwise), on such income, shall be entitled to ……………………
a) A deduction from the Indian income-tax payable by him
b) Exemption from tax in India on such income
c) A or B, whichever is more beneficial
d) None of the above
24. Any, resident in India, who has agricultural income in Pakistan, and has paid tax in Pakistan (by deduction or otherwise), on such income, shall be entitled to deduction of :-
a) Tax paid in Pakistan on agricultural income, provided it is also taxable under Income-Tax Act
b) Sum calculated on that income at the Indian rate of tax (i.e., average rate of income-tax)
c) A or B, whichever is lower
d) A or B, whichever is high
25. Non-resident assessee, who has a share in the income of a registered firm assessed as resident in India in any previous year, would be entitled to deduction when :-
a) The share of income from the firm, include income accruing or arising outside India during that previous year ;
b) The income accrues or arises in a country with which India does not have an agreement under section 90
c) Non-resident assessee should have paid income-tax in respect of such income according to the law in force in that country.
d) All of the above
26. Non-resident assessee, who has a share in the income of a registered firm assessed as resident in India in any previous year, would be entitled to deduction of sum calculated on such doubly taxed income so included, at the :-
a) Indian rate of tax or
b) Rate of tax of the said country,
c) A or B whichever is lower
d) A or B whichever is higher
27. Where the non-resident entity has business connection with the resident Indian entity, and the Indian entity constitutes a PE of the non-resident entity, the non-resident entity will :-
a) be liable to tax in India
b) be liable to tax outside India
c) Not be liable to tax at all in or outside India
d) None of the above
28. Non-resident would have a PE in India, if it carries on business in India through an agent (other than an independent agent) who :-
a) Habitually exercises an authority to conclude contracts
b) Has authority to conclude contracts
c) Habitually secures orders on behalf of the non-resident principal.
d) Both A and C
29. In case non-resident has PE in India its ……………………… are liable to tax in India :-
a) Whole business profits
b) Profits attributable to the business activities carried out in India by its PE
c) 50% of business profits
d) None of the above
30. In determining the profits of a PE, there shall be allowed as deduction :-
a) All the expenses incurred in India
b) Expenses which are incurred for the purposes of the PE
c) Expenses incurred outside India
d) None of the above
31. Foreign Tax Means :-
a) Taxes covered under DTAAs, in case India has DTAA with a Country Outside India
b) Tax payable under law in force in foreign Country with which India does not have a DTAA
c) Both A and B
d) None of the above
CA Final International Taxation MCQs – Double Taxation Relief
32. A resident assessee shall be allowed a foreign tax credit for foreign tax paid by him in the year :-
a) In which tax is paid outside India
b) In which income corresponding to such tax is assessable outside India
c) in which the income corresponding to such tax has been offered to tax or assessed to tax in India
d) None of the above
33. Ram, an Indian resident earns foreign income of Rs 5,00,00 during the PY 2016-17 . Tax of Rs 10,000 has been withheld on such income outside India in PY 2017-18. However, such foreign income is taxable in India in PY 2018-19. Foreign tax credit would be available in :-
a) 2016-17
b) 2017-18
c) 2018-19
d) None of the above
34. Where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed :-
a) In the first year in which income was offered to tax in India
b) In the last year in which income was offered to tax in India
c) Across all years in which income is offered to tax, in the same proportion in which the income is offered to tax or assessed to tax in India.
d) None of the above
35. The foreign tax credit shall not be available against :-
a) Interest, fee or penalty payable under the IT Act
b) Tax, surcharge and cess payable under the IT Act
c) Any amount of foreign tax which is disputed in any manner
d) Both A and C
36. Credit of any disputed foreign tax shall be allowed in the year in which such income is offered to tax or assessed to tax in India if :-
a) Assessee furnishes evidence of settlement of dispute of foreign tax liability, within 6 months of its settlement
Evidence of discharging foreign tax liability
b) Both A and B
c) None of the above
37. Foreign tax credit shall be aggregate of :-
a) Amounts of credit computed cumulatively for all sources of income
b) Cumulative amounts of credit, arising from all Countries outside India
c) Amounts of credit computed separately for each source of income arising from a particular country outside India
d) Both A and B
38. The amount of Foreign tax credit shall be the :-
a) Tax payable under the Income-Tax Act on such income arising from Outside India
b) The foreign tax paid on such income arising from Outside India
c) A or B, whichever is lower
d) None of the above
39. Where the foreign tax paid exceeds the amount of tax payable in accordance with DTAA, then :-
a) Such excess shall be ignored
b) Such excess shall be considered for allowing foreign tax credit
c) Credit of foreign tax shall not be available at all
d) None of the above
40. The credit of foreign tax shall be determined by conversion of the currency of payment of foreign tax at ………………………..on the last day of the month immediately preceding the month in which such tax has been paid or deducted :-
a) Telegraphic transfer selling rate
b) Telegraphic transfer buying rate
c) Average of Telegraphic transfer buying rate and selling rate
d) None of the above
41. Assessee shall be required to furnish ……………………… on or before due date of filing return to avail foreign tax credit
a) Statement of foreign income offered for tax and foreign tax deducted or paid on such income in Form No 67
b) Certificate or statement (specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee) from the tax authority of the country outside India; or from the person responsible for deduction of such tax; or
c) Certificate or statement (specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee) from the person responsible for deduction of such tax
d) All of the above
42. Meaning of terms used in DTAA would be taken from :-
a) Income-Tax Act
b) DTAA, if term is defined in DTAA
c) Income-Tax Act, if term is not defined in the DTAA but defined in the Income-Tax Act
d) Both B and C
43. Where the amount of foreign tax credit available against the tax payable under the provisions of MAT or AMT exceeds the amount of tax credit available against the normal provisions, then :-
a) While computing the amount of MAT credit such excess shall be ignored
b) Credit of foreign tax shall not be available at all
c) While computing the amount of MAT credit such excess shall be considered
d) None of the above
Correct Answers – CA Final International Taxation MCQs – Double Taxation Relief
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