CA Final International Taxation MCQs – Interpretation of Tax Treaties 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. Choose multilateral international agreement from the following :-
a) Vienna Convention on law of treaties
b) Double Taxation Avoidance Agreement between US and UK
c) Tax information exchange agreement between India and Cayman Island
d) All of the above
2. What is jurisdictional double taxation?
a) It takes place, when same transaction is taxed in two or more countries in the hands of different persons.
b) It takes place, when tax is imposed by two or more countries, as per their domestic laws, in respect of the same transaction, on the ground that income arises in their respective jurisdictions.
c) Both A and B
d) None of the above
3. What is economic double taxation?
a) It takes place, when same transaction is taxed in two or more countries in the hands of different persons.
b) It takes place, when tax is imposed by two or more countries, as per their domestic laws, in respect of the same transaction, on the ground that income arises in their respective jurisdictions.
c) Both A and B
d) None of the above
4. JCO Inc. is a resident of USA, and has a branch in India. If India taxes the profit of branch, whereas JCO Inc. is also taxable on its worldwide income in USA, including profits of its Indian branch, it would be a case of ………………….
a) Economic Double Taxation
b) Jurisdictional Double Taxation
c) Both A and B
d) None of the above
5. Dividend distributed by the Indian company is liable to Dividend Distribution Tax in the hands of Indian company, while the country of residence may tax it in the hands of shareholders. It would be a case of ………………….
a) Economic double taxation
b) Jurisdictional double taxation
c) Both A and B
d) None of the above
6. Which of the following treaty is comprehensive DTAA?
a) India-Afghanistan DTAA, which has limited Article
b) India-Pakistan DTAA, which taxes certain income
c) India-Germany DTAA which deal with all income
d) All of the above
7. Which of the following treaty would be considered as Limited DTAA?
a) India-Afghanistan DTAA, which has limited Article
b) India-Pakistan DTAA, which taxes certain income
c) India-Singapore DTAA
d) Both A and B
8. Select the correct statement from the following?
a) The Vienna Convention on Law of Treaties provides the basic rules of interpretation, of any international agreement (including a tax Treaty).
b) India is a signatory to Vienna Convention
c) It is mandatory for Indian Courts to apply principles given in Vienna Convention while interpreting tax treaties
d) None of the above
9. Which of the following articles of Vienna Convention provide for detailed rules of interpretation of tax treaties?
a) Article 31
b) Article 32
c) Article 33
d) All of the above
10. What is the principle enshrined in Article 31 of Vienna Convention?
a) Meaning of any term used in treaty should be taken from domestic laws of source state if its meaning is not provided in such treaty
b) A Treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to terms of the Treaty in their context and in the light of its object and purpose
c) Treaty shall not override the provisions of domestic tax laws of Source State
d) All of the above
CA Final International Taxation MCQs – Interpretation of Tax Treaties
11. What is the principle enshrined in Article 32 of Vienna Convention?
a) Meaning of any term used in treaty should be taken from domestic laws of source state if its meaning is not provided in such treaty
b) Where Vienna Convention Article 31 interpretation leaves ambiguous or absurd result, one can take recourse to supplementary means of interpretation, including the preparatory work of the Treaty and the circumstances of its conclusion.
c) Treaty shall not override the provisions of domestic tax laws of Source State
d) None of the above
12. What is the principle enshrined in Article 33 of Vienna Convention?
a) Meaning of any term used in treaty should be taken from domestic laws of source state if its meaning is not provided in such treaty
b) Treaty shall not override the provisions of domestic tax laws of Source State
c) If a Treaty has been authenticated in two or more languages, the text is equally authoritative in each language, unless the Treaty provides or the parties agree that, in case of divergence, a particular text shall prevail.
d) None of the above
13. What would be considered as Most Favoured Nation Clause from the following :-
a) When passive income in tax treaty is taxable at concessional rate or is given more restricted scope, with one Country due to favourable treatment in subsequent tax treaties with third countries
b) When income of foreign company is taxable at a rate less than the rate which is provided in all other tax treaties
c) When make available clause is not provided in tax treaties
d) None of the above
14. Select the correct statement :-
a) Every Treaty, which is in force, is not binding upon the parties to the Treaty, and it not mandatory for them to follow the Treaty, in good faith
b) Failure to perform obligations under a Treaty, cannot be justified by a Treaty country, by invoking the provisions of its internal law
c) Both A and B
d) None of the above
15. What would be considered as treaty override?
a) When taxability of non-resident is determined as per lesser rate of tax in Tax Treaty than the rate provided in Income Tax Act, 1961
b) When provisions of tax treaty would be applicable even if provisions of Income-Tax Act are beneficial
c) When non-resident is not eligible to get benefit of tax treaty
d) None of the above
16. Select the correct Statement as per Vienna Convention
a) Treaty provisions do not bind a party to a Treaty, in relation to any act or fact which took place before the date of the Entry into force of the Treaty
b) Treaty provisions do not bind a party to a Treaty, in relation to any act or fact which took place after the date of the Entry into force of the Treaty
c) Both A and B
d) None of the above
17. As per the Vienna Convention, when parties enter into successive treaties, relating to the same subject-matter then……………
a) The provisions of later treaty would prevail, when old treaty specifies that it is subject to later Treaty
b) When all the parties to the earlier Treaty are also parties to the later Treaty but earlier Treaty is not terminated or suspended, the earlier Treaty applies only to the extent that its provisions are compatible with those of the later Treaty.
c) The provisions of old treaty would prevail when old treaty specifies that it is subject to later Treaty
d) Both A and B
18. Sometimes parties to the Treaty subject themselves to provisions of other tax treaties that may be entered at a later date. In such cases the provisions of that later Treaty shall prevail. Such condition is imposed by insertion of …………………in tax treaties
a) Limitation of Benefit Clause
b) Make available clause
c) Most Favoured Nation Clause
d) None of the above
19. Which of the following would be considered as material breach of treaty as per Vienna Convention?
a) Repudiation of the Treaty not sanctioned by the Convention
b) Violating a provision essential to accomplishment of the object of the Treaty
c) Denial of treaty benefit to a party in absence of Tax Residency Certificate
d) Both A and B
20. What are the rights of the parties in case of material breach of treaty as per Vienna Convention?
a) Party specially affected by the breach can suspend operation of the Treaty between itself and the defaulting State
b) Other parties cannot suspend the operation of the Treaty with defaulting State, even by unanimous agreement
c) Both A and B
d) None of the above
CA Final International Taxation MCQs – Interpretation of Tax Treaties
21. When does a fundamental change of circumstances, not foreseen by parties at the time of the conclusion of a Treaty may be considered as a ground for terminating or withdrawing from treaty?
a) When such change radically transforms the extent of existing obligations under the Treaty
b) When such change brings minor changes in the extent of obligations to be performed under the Treaty
c) Where the existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the Treaty
d) Both A and C
22. What is a peremptory norm?
a) It is a norm which is widely used to interpret tax treaties
b) It is a fundamental principle of international law, from which deviation is permitted
c) It is a fundamental principle of international law accepted by international community of states, from which no deviation is permitted
d) None of the above
23. Though Indian tax treaties provide both Hindi and English as authentic texts, in case of divergence……………………… as per Treaties
a) There is an option to choose either text in English or text in Hindi
b) The text in Hindi shall prevail
c) The text in English shall prevail
d) None of the above
24. What is Tax Information Exchange Agreement (‘TIEA’)?
a) It is a type of comprehensive tax treaty
b) TIEAs are more detailed agreement on exchange of information than DTAAs, and specify the rules and procedures for how such information is to be exchanged
c) TIEAs are much broader in scope than DTAA
d) All of the above
25. Select the correct statement
a) Generally, information provided under TIEA will have to be treated as secret, and disclosed only to authorities concerned with determination of tax appeal
b) Requested information under TIEA cannot be provided when other party need such information for its own tax purposes
c) Both A and B
d) Once received, information under TIEA can be used for any purpose and disclosed under any law to anyone.
26. What would be considered as monist view in interpretation of treaties under Vienna Convention?
a) International law and domestic law are part of same system and DTAA override domestic law
b) International Law and National Law are separate systems, and DTAA becomes part of the National Legal system by specific incorporation / legislation
c) Wherein amendment in domestic provisions would override the existing DTAA
d) None of the above
27. What would be considered as dualistic view in interpretation of treaties under Vienna Convention?
a) International law and domestic law are part of same system and DTAA override domestic law
b) International Law and National Law are separate systems, and DTAA becomes part of the National Legal system by specific incorporation / legislation
c) Wherein amendment in domestic provisions would override the existing DTAA
d) None of the above
28. India follow ______________ view of interpretation.
a) Monist
b) Dualist
c) Monist or Dualist
d) Monist and Dualist
29. In case of payments to non-residents, which of the following tax rate would be considered?
a) Tax rate under DTAA
b) Tax rate under Income-Tax Act
c) A or B, whichever is more beneficial
d) None of the above
30. Which of the provision would apply to non-resident in case of existence of GAAR in that Country and where GAAR is applicable on a particular transaction?
a) Provisions of DTAA
b) Provisions of Income-Tax Act
c) A or B, whichever is more beneficial
d) Provisions of GAAR shall apply to the assessee, even if such provisions are not beneficial to him as compared to Income Tax Act or DTAA
CA Final International Taxation MCQs – Interpretation of Tax Treaties
31. Which of would be considered as territorial tax system?
a) Wherein tax is levied only on income from sources inside the country
b) Wherein tax is levied on global income of residents
c) Wherein tax is levied on non-residents deriving income from source outside the country
d) None of the above
32. Which of the following would be considered as objective interpretation of tax treaty?
a) Terms of a treaty are interpreted to facilitate attainment of aim and objectives of the treaty
b) Words and phrases used in Treaty are firstly to be construed according to their plain and natural meaning. However, if the grammatical interpretation would result in an absurdity it should not be adopted.
c) The Terms of a treaty are interpreted according to the common intention of the contracting parties at the time of entering into the treaty
d) None of the above
33. Which of the following would be considered as subjective interpretation of tax treaty?
a) Terms of a treaty are interpreted to facilitate attainment of aim and objectives of the treaty
b) Words and phrases used in Treaty are firstly to be construed according to their plain and natural meaning. However, if the grammatical interpretation would result in an absurdity it should not be adopted.
c) The Terms of a treaty are interpreted according to the common intention of the contracting parties at the time of entering into the treaty
d) None of the above
34. Which of the following would be considered as Liberal construction of tax treaty?
a) Words and phrases used in Treaty to be construed according to their plain and natural meaning.
b) Treaties shall be liberally construed to carry out the apparent intention of the parties.
c) Treaties should be given an interpretation in which the reasonable meaning of words and phrases is preferred, and in which a consistent meaning is given to different portions of the instrument.
d) None of the above
35. What do you understand by Protocol to tax treaty?
a) It is not a part of tax treaty and it merely provides clarifications on certain issues
b) It is a supplement to the treaty, but an integral part of the Treaty which is incorporated in a treaty to put certain matters beyond doubt.
c) It contains definition of terms used in tax treaties
d) None of the above
36. What is the purpose of introducing Protocol in tax treaty?
a) To define terms used in DTAA
b) To revise entire DTAA
c) To introduce amendments in tax treaties to specific clauses or provides additional paragraphs
d) None of the above
37. What is the role of preamble in tax treaty?
a) It provides meaning of terms used in tax treaties
b) It contains Most Favoured Nation Clause
c) It is the opening statement to the Tax Treaty and explains the reasons why the Two States entered into the Treaty
d) None of the above
38. Which of the following are Commentaries on Treaty :-
a) OECD
b) US
c) UN
d) All of the above
39. _______ Commentary is by and large based on ________ Commentary –
a) OECD ; UN
b) UN ; OECD
c) US ; UN
d) US ; OECD
40. OECD Commentary is directly applicable to …………..
a) India
b) OECD Countries
c) Both A and B
d) None of the above
CA Final International Taxation MCQs – Interpretation of Tax Treaties
41. Which of the following could be considered as static interpretation of tax treaty?
a) Where a treaty refers to the provision of the domestic laws for assigning meaning to a particular term, and subsequently the domestic law is changed, and the meaning prevailing in the domestic law of the contracting state at the date of signing the treaty is applied
b) Where a treaty refers to the provision of the domestic laws for assigning meaning to a particular term, and subsequently the domestic law is changed, and the meaning prevailing in the domestic law of the contracting state on the date of application of the treaty is applied
c) Both A and B
d) None of the above
42. Terms not defined in DTAA, but defined in the Act, would be assigned the meaning given in the ……………………….
a) Income-Tax Act
b) General Clauses Act
c) Any other Act
d) None of the above
CA Final International Taxation MCQs – Interpretation of Tax Treaties Answers
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