CA Final International Taxation Transfer Pricing MCQs 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. For applicability of CbC provisions, the “group” means:-
a) A parent entity and all the entities in respect of which, a consolidated financial statement for financial reporting purposes is required to be prepared
b) A parent entity and all the entities in respect of which, a consolidated financial statement would have been required to be prepared, had the preference shares of any of the enterprises were to be listed on a stock exchange in the country or territory of which the parent entity is resident
c) Any group of entities, which has more than one company
d) Any entity which is liable to submit transfer pricing Form 3CEB.
2. Specified domestic transaction includes :-
a) Any transaction between related entities where one of the party is a non-resident.
b) Inter-unit transfer of goods at less than Fair Market Value between two independent Indian companies
c) Inter-unit transfer of goods at less than and Fair Market Value between Indian companies which are part of same group where one of the company is claiming profit linked deduction u/s 80-ID.
d) All of the above
3. E India is claiming profit linked deduction u/s 80-IC. It made following transactions during the PY 2017-18. In which of the following cases, arm’s length price would be considered to determine income of E India, assuming total specified domestic transaction exceed Rs 20 crore:-
a) It avails certain services from its group concern EE India for Rs 1,00,000. It avails same services from third party at Rs 1,25,000.
b) It avails certain services from its group concern EEE India for Rs 2,00,000. It avails same services from third party at Rs 1,25,000.
c) It avails certain services from its group concern EEEE India for Rs 2,00,000 and also avails same services from third party at Rs 2,00,000.
d) All of the above
4. The aggregate of Specified Domestic transactions entered into by the assessee in the previous year should exceed a sum of ………………., to be considered as specified domestic transaction.
a) Rs 1 crore.
b) Rs 20 crore
c) Rs 10 crore
d) None of the above
5. Aaj Hotels India Private ltd. is claiming exemption under Section 80-ID. Aaj India Private ltd. was group concern of Aaj Hotels, but it is not claiming any profit linked deduction. Aaj India has used the hotel space of Aaj Hotels for certain event and paid Rs 10 crores during the PY 2017-18 and there is no other transaction during such PY. In this case, provisions of :-
a) Transfer pricing for Specified Domestic Transactions would be applicable
b) Transfer pricing for international transactions would be applicable
c) Transfer pricing for Specified Domestic Transactions would be applicable as the value of transaction exceeds Rs 1 crore
d) None of the above
Reasoning
The aggregate SDT entered into by the assessee in the previous year should exceed a sum of Rs 20 crore to be considered as specified domestic transaction. Thus, such transaction would not be considered as specified domestic transaction.
6. In which of the following cases, maintenance of information and documents is required under transfer pricing:-
a) Where value of specified domestic transactions is Rs 15 crores during the PY
b) Where value of international transaction is Rs 10 crores during the PY.
c) Where value of specified domestic transactions is Rs 25 crores during the PY
d) Both B and C
7. Failure to report Specified Domestic Transaction in Form 3CEB would be considered as………… :-
a) Under-reporting of income
b) Misreporting of income
c) Concealment of income
d) None of the above
8. Failure to report specified domestic transaction would attract penalty of ……. u/s 270A:-
a) Rs 1,00,000
b) 200% of tax payable.
c) 300% of tax payable.
d) None of the above
9. Jek India ltd. has availed services from its foreign subsidiary of Rs 1,00,00 and it has also disclosed such transaction in Form 3CEB during the PY 2017-18. It has also prepared TP study to justify application of appropriate TP method. During assessment, the AO made additions on basis of arm’s length price determined by TPO. The addition would be considered as –
a) Under-reporting of income
b) Misreporting of income
c) Concealment of income
d) None of the above
10. Failure to furnish Form 3CEB for specified domestic transactions would attract penalty of :-
a) 300% of tax payable
b) Rs 1,00,000
c) 200% of tax payable
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
11. Which of the following transfer pricing methods may be adopted to determine arm’s length price in relation to specified domestic transactions :-
a) CUP
b) TNMM
c) Profit Split Method
d) All of the above
12. Provision of specified domestic transaction would be applicable:-
a) For all transaction between domestic related parties.
b) For all transaction between domestic related parties aggregate value of which exceeds Rs 20 crores.
c) For all transaction between domestic related parties aggregate value of which exceeds Rs 20 crores, provided one of the parties to transaction is claiming profit linked deduction u/s 80-IA, 80-IB, etc.
d) None of the above
13. Every person who enters into an ………………………….during a previous year is required to obtain a report from a chartered accountant and furnish such report on or before due date of filing of return of income in Form No.3CEB :-
a) Specified Domestic transactions
b) International Transactions
c) Domestic transactions
d) Both A and B
14. Which of the following persons can opt for safe harbour rules under provisions of specified domestic transactions?
a) Any Indian company which enters into specified domestic transactions exceeding Rs 20 crore
b) Government company engaged in the business of generation, supply, transmission or distribution of electricity
c) Co-operative society engaged in the business of procuring and marketing milk and milk products.
d) Both B and C
15. Which of the following transactions can be considered as eligible Specified Domestic Transaction for application of safe harbour rules?
a) Supply/transmission/wheeling of electricity
b) Purchase of milk or milk products by a co-operative society from its members.
c) Any specified domestic transaction aggregate value of which exceeds Rs 20 crores
d) Both A and B
16. In safe harbour Rules, the actual price declared by Government company for supply/transmission/distribution of electricity would be accepted when :-
a) Supply/transmission/wheeling of electricity is made at the Market Price
b) Supply/transmission/wheeling of electricity is made at less than Market Price
c) Tariff in respect of supply/transmission/wheeling of electricity is determined by appropriate Commission.
d) None of the above
17. In safe harbour Rules, the actual price declared by the Co operative society for purchase of milk products from its members would be accepted when :-
a) Prices are determined on the basis of market value of milk in the open market
b) Prices are determined on the basis of quality of milk, namely, fat content and solid not fat content of milk
c) Prices are determined on basis of market value after adjusting for quantity discount
d) None of the above
18. The provisions relating to maintenance of information and document and submission of report in Form No. 3CEB in respect of specified domestic transaction :-
a) Shall apply irrespective of the fact that the assessee exercises his option for Safe Harbour Rules.
b) Shall apply only when assessee has not exercised option for safe harbour rules
c) Shall not apply at all
d) None of the above
19. ABB, Society has procured milk from its members during the PY 2017-18. It can apply for safe harbour rules in Form 3CEFB on or before :-
a) 30th November, 2018
b) 30th September, 2018
c) 30th July, 2018
d) None of the above
20. The Assessing Officer shall pass the order declaring the option exercised by the assessee as invalid within a period of …………from the end of the month in which application in Form 3CEFB is received by him.
a) 6 months
b) 9 months
c) 3 months
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
21. If assessee does not accept the AO’s order to declare Safe Harbour option invalid, he can file objection with ______ of receipt of order of the AO.
a) 30 days
b) 60 days
c) 15 days
d) None of the above
22. On receipt of the objection from assessee the Principal Commissioner or the Commissioner or the Principal Director or the Director, shall pass appropriate order, within a period of ………..from the end of the month in which the objection filed by the assessee is received by them
a) 2 months
b) 3 months
c) 6 months
d) None of the above
23. “Safe harbour” is a mechanism :-
a) To determine range where more than one price is determined by use of appropriate method
b) To determine Arm’s Length Price
c) To reduce litigation, and implies circumstances under which, the tax authorities shall accept the Transfer Price declared by the taxpayer
d) None of the above
24. In which of the following international transactions safe harbour rules may be applied :-
a) Corporate guarantee to wholly owned subsidiary
b) Software development services
c) Royalty / Fees for Technical services received from foreign subsidiary
d) Both A and B
25. In which of the following international transactions safe harbour rules may be applied :-
a) Provision of Information Technology Enabled Services with insignificant risk
b) Provision of KPO services with insignificant risk
c) Provision of contract R & D relating to software development
d) Both A and C
26. In which of the following international transactions safe harbour rules may be applied :-
a) Provision of Information Technology Enabled Services with significant risk
b) Provision of KPO services with significant risk
c) Provision of contract R & D relating to software development
d) All of the above
27. What would be the operating margin under Safe Harbour Rules where value of software development services with insignificant risk is Rs 80 crores?
a) 10% or more
b) 17% or more
c) 18% or more
d) None of the above
28. What would be the operating margin under Safe Harbour Rules where value of KPO services with insignificant risk is Rs 90 crores?
a) 24% or more
b) 21% or more
c) 18% or more
d) Depends upon the % of employee cost to operating expense
29. What would be the operating margin under Safe Harbour Rules where value of KPO services with insignificant risk is Rs 300 crores?
a) 24% or more where employee cost to operating expense ratio is 60% or more.
b) 21% or more where employee cost to operating expense ratio is 40% – 60%.
c) 18% or more where employee cost to operating expense ratio is 40% or less.
d) None of the above
30. What would be the operating margin under Safe Harbour Rules where value of Information Technology Enabled Services with insignificant risk is Rs 150 crores?
a) 17% or more
b) 18% or more
c) 10% or more
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
31. What would be the commission or fee under Safe Harbour Rules for Corporate Guarantee provided to wholly owned subsidiary?
a) 2% or more p.a. on amount guaranteed
b) 5% or more p.a. on amount guaranteed
c) 1% or more p.a. on amount guaranteed
d) None of the above
32. What would be the operating margin under Safe Harbour Rules where value of contract R&D services relating to software development is Rs 150 crores?
a) 24% or more
b) 18% or more
c) 10% or more
d) None of the above
33. What would be the operating margin under Safe Harbour Rules where value of contract R&D services relating to software development is Rs 250 crores?
a) 24% or more
b) 18% or more
c) 10% or more
d) None of the above
34. What would be the operating margin under Safe Harbour Rules where value of contract R&D services relating to generic pharmaceutical drugs is Rs 150 crores?
a) 24% or more
b) 18% or more
c) 10% or more
d) None of the above
35. What would be the operating margin under Safe Harbour Rules where value of contract R&D services relating to generic pharmaceutical drugs is Rs 250 crores?
a) 24% or more
b) 18% or more
c) 10% or more p.a. on amount guaranteed
d) None of the above
36. What would be the operating margin under Safe Harbour Rules for manufacture and export of core auto components where value of such international transaction is Rs 150 crores?
a) 24% or more
b) 18% or more
c) 12% or more
d) None of the above
37. What would be the operating margin under Safe Harbour Rules for manufacture and export of core auto components where value of such international transaction is Rs 250 crores?
a) 24% or more
b) 18% or more
c) 12% or more
d) None of the above
38. What would be the operating margin under Safe Harbour Rules for manufacture and export of non-core auto components where value of such international transaction is Rs 150 crores?
a) 24% or more
b) 18% or more
c) 12% or more
d) 8.5% or more
39. What would be the operating margin under Safe Harbour Rules for manufacture and export of core auto components where value of such international transaction is Rs 290 crores?
a) 24% or more
b) 8.5% or more
c) 12% or more
d) None of the above
40. What would be the mark-up on cost under Safe Harbour Rules where value low value adding intra-group services is Rs 5 crores?
a) 5% or less
b) 5% or more
c) 10% or more
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
41. What would be the mark-up on cost under Safe Harbour Rules where value of low value adding intra-group services is Rs 15 crores?
a) 5% or less
b) 5% or less
c) 10% or more
d) None of the above
42. What is the meaning of operating margin under Safe Harbour Rules?
a) Operating profit / Net Profit
b) Operating profit / sales
c) Operating profit / operating expense
d) None of the above
43. Safe harbour rules shall not be applicable in respect of eligible international transaction entered into with an Associated Enterprise (‘AE’) :-
a. Where AE is located in Notified Jurisdiction Area u/s 94A.
b. Where AE is located outside India in a high tax jurisdiction.
c. Where AE is located in more than one country
d. None of the above
44. During the course of assessment proceedings, AO may determine the arm’s length price in relation to international transaction and specified domestic transaction where :-
a) Price charged in such transaction has not been determined as per transfer pricing method
b) Most appropriate transfer pricing method is not used to determine arms’ length price
c) Unreliable or incorrect information is used in computation of arm’s length price
d) All of the above
45. WE India is claiming section 10A deduction on its profits of Rs 50 lakh. It enters into an international transaction with its AE. During the course of assessment proceedings, AO made additions of Rs 10 lakhs on basis of arm’s length price determined by TPO. What would be the taxable income when WE India wants to claim Section 10A deduction on additions made by AO? :-
a) Rs 55 lakhs
b) Rs 60 lakhs
c) Rs 50 lakhs
d) None of the above
46. Indian company paid Rs 45 lakh as Fee for Technical Services to its foreign subsidiary after deducting Rs 5 lakh as withholding tax. However, during assessment the Arm’s length price of such transaction was determined at Rs 40 lakhs. Determine the total income of Foreign subsidiary taxable in India :-
a) Rs 40 lakhs
b) Rs 50 lakhs
c) Rs 45 lakhs
d) None of the above
47. The Assessing Officer ………………………for determining the Arm’s length price of international transaction or specified domestic transaction.
a) has the option to make reference to TPO
b) has to make reference to TPO on request of assessee
c) has to make reference to TPO in each and every case.
d) None of the above
48. AO can make reference to TPO :-
a) Without obtaining approval from any authority
b) After obtaining prior approval of the Principal Commissioner of Income-tax (PCIT)/ Commissioner of Income-tax (CIT)
c) After obtaining prior approval of the CIT (A)
d) None of the above
49. The TPO can determine the ALP of :-
a) International transaction referred by AO to TPO
b) International transactions which comes to notice of TPO subsequently in the course of proceedings before him
c) Both A and B
d) None of the above
50. The order of the Transfer Pricing Officer determining the arm’s length price of an international transaction or specified domestic transaction is binding on the :-
a) Assessing Officer
b) CIT(A)
c) Both A and B
d) None of the above
51. AVV India exports goods to its foreign parent company for Rs 10 lakhs. However, the TPO determined the arm’s length price of such transaction at Rs 15 lakhs. The AO can compute total income on the basis of :-
a) Rs 17 lakhs as he can reject the arm’s length price determined by TPO
b) Rs 15 lakhs
c) Rs 10 lakhs
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
52. AB India has made international transaction with its foreign parent company during the PY 2017-18. Its case is selected for scrutiny and the AO has made reference to TPO to determine the arm’s length price. The due date of passing order by TPO would be :-
a) September 30, 2021
b) December 31, 2021
c) August 1, 2021
d) None of the above
53. Which of the following time-period would be excluded in computing the time-limit for passing order by TPO :-
a) Time period for which assessment proceedings before TPO were stayed
b) Time taken for receipt of information from foreign jurisdiction as per DTAA
c) Time period taken by TPO to determine the Arm’s length price of transaction
d) Both A and B
54. Where any mistake apparent from the record is noticed by the TPO :-
a) AO can rectify that order under section 154
b) TPO can rectify his own order under section 154
c) Either A or B
d) None of the above
55. Where any mistake apparent from the record is noticed by the TPO, he can revise his order within :-
a) 2 years from the end of FY in which order sought to be amended was passed
b) 4 years from the end of FY in which order sought to be amended was passed
c) 6 years from the end of FY in which order sought to be amended was passed
d) None of the above
56. Secondary Adjustment means :- –
a) Any transfer pricing adjustment which is made on the basis of arm’s length price of international transaction
b) An adjustment in the books of accounts of the assessee and its Associated Enterprise to reflect that the actual allocation of profits are consistent with the transfer price
c) Any transfer pricing adjustment which is made on the basis of arm’s length price of specified domestic transaction
d) Both A and C
57. Secondary Adjustment shall be made when Primary Adjustment to transfer price:- –
a) has been made suo motu by the assessee in his return of income
b) has been made by the Assessing Officer but it was not accepted by the assessee;
c) has been determined by TPO
d) None of the above
58. Secondary Adjustment shall not be made when Primary Adjustment to transfer price:-
a) Has been determined under Advance Pricing Agreement
b) Has been determined as per safe harbour rules
c) Is challenged by assessee before income-tax authorities.
d) None of the above
59. “Primary adjustment” to a transfer price means determination of transfer price in accordance with the arm’s length principle resulting in :-
a) Increase in total income
b) Decrease in total income
c) Increase in loss
d) None of the above
60. Where, there is addition in total income due to primary adjustment to the transfer price,
a) Addition will be made for the excess money which is available with its Associated Enterprise
b) The excess money which is available with the Associated Enterprise shall be deemed to be an advance, if such money is not repatriated within specified time-limit
c) The excess money which is available with the Associated Enterprise shall be deemed to be an dividend, if such money is not repatriated within specified time-limit
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
61. Where, there is addition in total income due to primary adjustment to the transfer price, Secondary adjustment will be made :-
a) In books of accounts
b) In tax computation
c) Both A and B
d) Neither A or B
62. What would be the time-limit for repatriation of excess money (available with Associated Enterprise) to India, where primary adjustment has been made suo-motu by assessee in his return of income :-
a) Within 120 days from due date of filing return of income
b) Within 90 days from due date of filing return of income
c) Within 60 days from due date of filing return of income
d) None of the above
63. Indian company paid interest of Rs 15 crores on Compulsory Convertible Debentures issued to its foreign parent company. However, it has determined arm’s length price of such transaction at Rs 10 crores and made additions in its return of income. Indian company is unable to repatriate excess money of Rs 5 crores within 90 days of filing return of income. In that case :-
a) Primary adjustment would be of Rs 10 crores and Secondary adjustment would be of Rs 5 crores
b) Primary adjustment would be of Rs 5 crores and Secondary adjustment would be of Rs 5 crores
c) Primary adjustment would be of Rs 5 crores and Secondary adjustment would be Rs 5 crores in books of account.
d) None of the above
64. Secondary adjustment shall not be carried out if, the amount of primary adjustment in any previous year is not more than ………….and the primary adjustment is made in respect of A.Y.2016-17 or an earlier assessment year
a) Rs 20 crores
b) Rs 1 crore
c) Rs 50 lakhs
d) None of the above
65. In case of secondary adjustment, where international transaction is denominated in INR, then the interest income on excess money available with Associated Enterprise shall be computed as per which of the following rate of interest :-
a) One-year marginal cost of lending fund of SBI as on April 1 of PY + 3.25%
b) LIBOR as on September 30 of PY + 3%
c) LIBOR as on September 30 of PY + 3.25 %
d) None of the above
66. In case of secondary adjustment, where international transaction is denominated in foreign currency then the interest income on excess money available with Associated Enterprise shall be computed as per rate of interest :-
a) One-year marginal cost of lending fund of SBI as on April 1 of PY + 3.25%
b) LIBOR as on September 30 of PY + 3%
c) LIBOR as on September 30 of PY + 3.25 %
d) None of the above
67. The tax dispute resolution mechanism under transfer pricing in India consists of :-
a) Advance Ruling
b) Safe Harbour Rules / Advance Pricing Agreement / Mutual Agreement Procedure
c) Reference to TPO
d) All of the above
68. Who will be eligible to file objections before DRP?
a) Foreign Company / Any person in whose case variation arises on account of order passed by Transfer Pricing Officer
b) Indian company only
c) Any person who is liable to file Form 3CEB
d) All of the above
69. Assessee can file objections against the draft order with the DRP within ……………of the receipt of the draft order
a) 60 days
b) 30 days
c) 120 days
d) None of the above
70. Where any objections are received from assessee, DRP shall issue directions for guidance of the AO to enable him to complete the assessment. Such direction should be issued within ………………from the end of the month in which the draft order is forwarded to the eligible assessee
a) 6 months
b) 3 months
c) 9 months
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
71. The Dispute Resolution Panel may
a) Confirm the additions proposed by AO;
b) Reduce / enchance the additions proposed by AO;
c) Both A and B
d) None of the above
72. Upon receipt of direction of DRP, the Assessing Officer shall complete the assessment in accordance with such direction, within……………. from the end of the month in which the direction is received without providing any further opportunity of being heard to the assessee
a) 1 month
b) 2 months
c) 6 months
d) None of the above
73. Upon receipt of directions of DRP, the Assessing Officer shall complete the assessment in accordance with such direction. Such order of the Assessing Officer is directly appealable before :-
a) CIT
b) CIT (A)
c) High Court
d) Tribunal
74. Once the AO’s order is issued after giving effect to DRP directions or CIT(A), an appeal can be filed with the Income-tax Appellate Tribunal (‘the Tribunal’) within a period of ………..from the date on which the order sought to be appealed against is communicated to the assessee or the Principal Commissioner or Commissioner
a) 60 days
b) 90 days
c) 120 days
d) None of the above
75. An Advance Pricing Agreement is an agreement between a tax payer/applicant and the CBDT, which determines the
a) Arm’s length price of future intercompany transactions or existing international transactions
b) The manner in which ALP is to be computed.
c) Both A and B
d) None of the above
76. An Advance Pricing Agreement can be made for :-
a) International Transactions
b) Specified Domestic Transactions
c) Any future transaction
d) Both A and B
77. Unilateral Advance Pricing Agreement is an Agreement between the :-
a) CBDT, Foreign tax authority and the Assessee
b) Assessee and CBDT
c) CBDT, Foreign tax authority, Foreign Associated Enterprise and the Assessee
d) None of the above
78. Bilateral Advance Pricing Agreement is an Agreement between the :-
a) CBDT, Foreign tax authority and the Assessee
b) Assessee and CBDT
c) CBDT, Foreign tax authority, Foreign Associated Enterprise and the Assessee
d) None of the above
79. Unilateral APA does not involve:-
a) CBDT
b) Assessee
c) Treaty partner Country
d) All of the above
80. Multilateral Advance Pricing Agreement is an Agreement between the :-
a) CBDT, Foreign tax authority and the Assessee
b) Assessee and CBDT
c) CBDT, Foreign tax authority, Foreign Associated Enterprise and the Assessee
d) Applicant (i.e., the taxpayer), Two or more AEs, Two or more foreign tax authorities, and CBDT
CA Final International Taxation Transfer Pricing MCQs
81. In bilateral Advance Pricing Agreement, applicant is required to make an application with :-
a) CBDT
b) Foreign tax authority
c) CBDT and simultaneously the applicant or its AE should also apply to Competent Authority of other Country
d) None of the above
82. The Advance Pricing Program is designed :-
a) To provide certainty over determination of ALP of covered international transaction
b) To reduce compliance costs
c) To determine taxation rate on international transactions
d) Both A and B
83. Request for bilateral or multilateral APA can be accepted by the Indian competent authority only when :-
a) India has DTAA with the other Contracting State, and such DTAA has an Article on ‘Mutual Agreement Procedure’;
b) Corresponding Advance Pricing Agreement program is also there in the other country.
c) Both A and B
d) None of the above
84. The transfer pricing method for determination of arm’s length price in the Advance Pricing Agreement, may include :-
a) CUP
b) TNMM
c) Resale Price Method
d) All of the above
85. AA India imported certain product from its foreign parent company at a price of Rs 1 crore. It has imported same product from another associated enterprises for Rs 70 lakhs. There are no material difference between two products. AA India enters into an Advance Pricing Agreement with CBDT. In this case, the transfer pricing method for determination of arm’s length price would be :-
a) CUP
b) TNMM
c) Resale Price Method
d) Other method prescribed in Advance Pricing Agreement
86. The maximum validity period of Advance Pricing Agreement shall be :-
a) 5 consecutive years
b) 4 consecutive years
c) 3 previous years
d) 10 previous years
87. GI India enters into an Advance Pricing Agreement for determination of Arm’s Length Price of Technical Services availed from GI Inc. (Parent company). Such Advance Pricing Agreement shall be binding on : –
a) GI India
b) ABB India an independent company which availed similar services from GI Inc.
c) ABC India for payment of interest to its Associated Enterprise
d) Both A and B
88. The CBDT may declare Advance Pricing Agreement to be void ab initio, with the approval of Central Government where : –
a) There is change in law after signing of Advance Pricing Agreement
b) Advance Pricing Agreement has been obtained by way of fraud or misrepresentation of facts
c) There is change in facts after signing of Advance Pricing Agreement
d) All of the above
89. Indian Company has entered into an Advance Pricing Agreement with CBDT for international transactions on 31.12.2016, during PY 2016-17. Such APA was declared as void ab initio by CBDT during PY 2017-18 on September 30, 2017 which one of following is true:-
a) Indian Company can adopt the transfer pricing method declared in Advance Pricing Agreement while computing its taxable income of AY 2017-18.
b) Indian Company can adopt the transfer pricing method declared in Advance Pricing Agreement while computing its taxable income of AY 2018-19.
c) Indian company cannot adopt transfer pricing method declared in Advance Pricing Agreement
d) None of the above
90. When Advance Pricing Agreement is declared as void ab initio, the period beginning with……………………, shall be excluded for the purpose of computation of period of limitation for assessment under the Income-Tax Act.
a) The date of such Advance Pricing Agreement and ending on the date of order declaring the Advance Pricing Agreement as void-ab-initio
b) The PY in which Advance Pricing Agreement was declared as void-ab-initio and ending on the date of order declaring the Advance Pricing Agreement as void-ab-initio
c) Date on which international transaction was entered and ending on the date of order declaring the Advance Pricing Agreement as void-ab-initio
d) None of the above
CA Final International Taxation Transfer Pricing MCQs
91. Any person may enter into an Advance Pricing Agreement :-
a) Who has undertaken / contemplating to undertake an international transaction
b) Who is contemplating to undertake Specified Domestic Transactions
c) Both A and B
d) None of the above
92. The pre-filing consultation :-
a) Shall not bind the CBDT or the proposed applicant to initiate APA process
b) Shall be deemed to imply that the person has applied for entering into an APA.
c) Is optional for person unleading to file an APA
d) Both A and C
93. Application for Advance Pricing Agreement :-
a) Cannot be withdrawn after applying for pre-filing consultation
b) Can be withdrawn at any time before finalization of terms of agreement
c) Can be withdrawn at any time before signing of Advance Pricing Agreement
d) None of the above
94. Vata India has undertaken transaction for sale of product V to its subsidiary, ZATA Inc (USA) during the PY 2014-15, 2015-16 and 2016-17. It intends to apply for Advance Pricing Agreement to determine the transfer pricing methodology for sale of product V to ZATA Inc during in PY 2018-19. Determine the time limit for filing APA application
a) March 31, 2019
b) March 31, 2018
c) April 1, 2018
d) None of the above
95. V India intents to import product Z from its foreign subsidiary on August 7, 2018. It has not undertaken such transaction in the past. Determine the time limit before which it can file APA application.
a) April 1, 2018
b) March 31, 2018
c) March 31, 2019
d) August 6, 2018
96. GV India has entered into an Advance Pricing Agreement for PY 2017-18, 2018-19 and 2019-20. It is required to submit Annual compliance report to Director General of Income-tax (International Taxation) for :-
a) PY 2017-18
b) PY 2018-19
c) PY 2017-18, 2018-19 and 2019-20
d) None of the above
97. Indian Company enters into an Advance Pricing Agreement on July 1, 2018 for AY 2018-19. The due date of filing of compliance report by Indian company would be :-
a) December 30, 2018
b) September 30, 2018
c) November 30, 2018
d) None of the above
98. The Transfer Pricing Officer having the jurisdiction over the assessee shall carry out the compliance audit of the APA for each of the year covered in the agreement. The compliance audit report shall be furnished by the Transfer Pricing Officer ……………..from the end of the month in which the Annual Compliance Report is received by the Transfer Pricing Officer.
a) Within 90 days
b) Within 3 months
c) Within 6 months
d) None of the above
99. An Advance Pricing Agreement may be revised by the CBDT
a) Suo-moto
b) On request of the assessee
c) A or B
d) None of the above
100. The revision in Advance Pricing Agreement can take place when there is: –
a) Change in critical assumptions
b) Failure to meet a condition, subject to which the APA was entered into
c) Request from competent authority in the other country requesting revision of APA, in case of bilateral or multilateral agreement.
d) All of the above
CA Final International Taxation Transfer Pricing MCQs
101. The revision in Advance Pricing Agreement can take place when : –
a) Assessee wants to revise the transfer pricing methodology in later years
b) When applicant had opted for Advance Pricing Agreement with rollback provision, and failed to give effect to rollback provisions of the APA
c) Both A and B
d) None of the above
102. Indian Company enters into an APA for the PY 2018-19 for international transaction with foreign Associated Enterprise. In this case the roll back year means :-
a) 2017-18, 2016-17, 2015-16, 2014-15, 2013-12
b) 2017-18, 2016-17, 2015-16
c) 2017-18, 2016-17
d) 2017-18, 2016-17, 2015-16, 2014-15
103. Indian company imports silk saree from its foreign Associated Enterprise located in USA during the PY 2015-16 and 2016-17. Now it wants to import cotton saree from same foreign Associated Enterprise during the PY 2018-19. For said purpose it wants to enter into an APA with rollback provision. The roll back provision would apply for :-
a) PY 2016-17
b) PY 2015-16 and 2016-17
c) PY 2018-19
d) None of the above
104. SD India imports silk saree from its foreign Associated Enterprise located in UK during the PY 2015-16 and 2016-17. Now it wants to import same silk saree from another Associated Enterprise located in USA during the PY 2018-19. For said purpose it wants to enter into an APA with rollback provision. The roll back provision would apply for :-
a) PY 2016-17
b) PY 2015-16 and 2016-17
c) PY 2018-19
d) None of the above
105. The benefit of roll back would be available for preceding four years under Advance Pricing Agreement when :-
a) Return of income is filed u/s 139(1) in all preceding four years
b) Return of income is filed u/s 139(4) in all preceding four years
c) Return of income is filed u/s 139(1) in any of the preceding four years
d) None of the above
106. The benefit of roll back would not be available for preceding four years under Advance Pricing Agreement when :-
a) Return of income was filed u/s 139(1) in all preceding four years
b) Belated income-tax returns were filed u/s 139(4) in all preceding four years
c) Form 3CEB was filed in all the four preceding years along with return of income u/s 139(1)
d) All of the above
107. The applicant has to apply for roll back provision in Advance Pricing Agreement :-
a) In all the four preceding years, even if same international transaction did not exist or there is some disqualification in any of such years
b) In any one of the four preceding years
c) In any two years out of preceding four years
d) None of the above
108. The Indian Company wants to enter into an Advance Pricing Agreement with rollback provision for international transaction to be undertaken in AY 2018-19. It had entered into same transaction in AYs 2017-18, 2016-17, 2015-16 and 2014-15. It can request for roll back :-
a) For AYs 2014-15 and 2015-16
b) For AYs 2014-15, 2015-16 and 2016-17
c) For AYs 2014-15, 2015-16, 2016-17 and 2017-18
d) AY 2014-15
109. Rollback provision shall not be provided in respect of an international transaction for a rollback year, if,-
a) Appellate Tribunal has passed an order on determination of arm’s length price of the said international transaction for the said year at any time before signing of the agreement
b) The application of rollback provision has the effect of reducing the total income or increasing the loss, as the case may be, of the applicant as declared in the return of income of the said year.
c) Such international transaction is different from international transaction for which Advance Pricing Agreement is made
d) All of the above
110. Rollback provision shall not be provided in respect of an international transaction for a rollback year, if,-
a) Appellate Tribunal has determined arm’s length price of the said international transaction for the said year at any time before signing of the agreement
b) The application of rollback provision has the effect of reducing the total income or increasing the loss
c) Such international transaction is different from international transaction for which Advance Pricing Agreement is made
d) All of the above
CA Final International Taxation Transfer Pricing MCQs
111. As per Section 92CD modified return for first of PY in respect of rollback year shall be furnished within ….. months from the end of the month in which Advance Pricing Agreement was entered.
a) 1 month
b) 2 month
c) 3 month
d) None of the above
112. If any appeal filed by the applicant is pending before the Commissioner (Appeals), Appellate Tribunal or the High Court for a rollback year, on the issue which is the subject matter of the rollback provision, the said appeal to the extent of the subject covered under the APA ……………….. before furnishing the modified return.
a) Shall be abated
b) Shall be withdrawn by CIT (A) or Tribunal or High Court
c) Shall be withdrawn by the applicant
d) None of the above
113. If any appeal filed by the Assessing Officer or the Principal Commissioner or Commissioner is pending before the Appellate Tribunal or the High Court for a rollback year, the said appeal to the extent of the subject covered under the Advance Pricing Agreement, …………………..within three months of filing of modified return by the applicant.
a) Shall be withdrawn by the Assessing Officer or the Principal Commissioner or the Commissioner
b) Shall be withdrawn by assessee
c) Shall be abated
d) None of the above
114. ABD India Ltd. has entered into an Advance Pricing Agreement for FY 2017-18 with rollback provision. However, it failed to file modified return for rollback year 2016-17 within 3 months from the end of the month in which Advance Pricing Agreement was entered. In this case :-
a) Entire Advance Pricing Agreement shall be cancelled
b) Only that part of Advance Pricing Agreement shall be cancelled which is related to all rollback years, i.e., FY 2016-17, 2015-16, 2014-15 and 2013-14.
c) Only that part of Advance Pricing Agreement shall be cancelled which is related to rollback year 2016-17 in which default occurred.
d) None of the above
115. ADD India Ltd. has entered into an Advance Pricing Agreement for FY 2017-18 on September 30, 2017. It has not filed the income-tax return for FY 2017-18 at that time. In order to give effect to APA :-
a) It needs to file return of income for FY 2017-18 and then modified return within 3 months
b) It needs to file return of income after giving effect to Advance Pricing Agreement
c) It needs to file return of income and modified return together
d) None of the above
116. In case a person has entered into an APA and prior to the date of entering into such APA, he has furnished the return of income for assessment year to which the APA applies, then, such person shall, within a period of …………from the end of the month in which the said APA was entered into, furnish a modified return.
a) 6 months
b) 3 months
c) 9 months
d) None of the above
117. ADV India has entered into an Advance Pricing Agreement for FY 2017-18 on December 30, 2017. It has filed the income-tax return for FY 2017-18 on November 30, 2018. In order to give effect to APA :-
a) It needs to file modified return till March 31, 2019
b) It needs to file modified return till January 31, 2019
c) It needs to file modified return till February 28, 2019
d) None of the above
118. Where the assessment or reassessment proceedings for an assessment year to which the Advance Pricing Agreement applies, are pending on the date of filing of modified return, the Assessing Officer shall proceed to complete the assessment or reassessment proceedings :-
a) After considering the modified return.
b) After considering the original return
c) Either A or B
d) None of the above
119. Mutual Agreement Procedure is :-
a) A special facilitative procedure set out in various tax treaties that allows designated government representatives of Treaty partners to work together, and resolve international tax disputes, including cases of double taxation arising out of application of the Convention.
b) A procedure to determine the arm’s length price of international transaction under transfer pricing
c) A procedure to allow foreign tax credit
d) None of the above
120. As per Article 25 of the OECD Model tax convention, mutual agreement procedures are generally used :-
a) Where taxation is not in accordance with the provisions of the convention
b) To determine transfer pricing method which would be applicable for international transaction
c) Resolve the Questions of Interpretation or application of the convention
d) Both A and C
CA Final International Taxation Transfer Pricing MCQs
121. Juridical double taxation may arise when :-
a) The same transaction is taxed in two or more Countries but in hands of different person
b) Tax is imposed by two or more countries as per their domestic laws, in respect of the same transaction.
c) Multiple type of taxes are imposed on same transaction in India
d) None of the above
122. Economic double taxation may arise when :-
a) The same transaction is taxed in two or more Countries but in hands of different person
b) Tax is imposed by two or more countries as per their domestic laws, in respect of the same transaction.
c) Multiple type of taxes are imposed on same transaction in India
d) None of the above
123. MAP provides relief in cases of :-
a) Juridical Double Taxation
b) Economic Double Taxation
c) Jurisdictional Double Taxation
d) None of the above
124. The Assessing Officer gives effect of the decision of the MAP within ……days of receiving instructions from the CCIT / DGIT
a) 120 days
b) 10 days
c) 60 days
d) 90 days
125. The Assessing Officer gives effect of the decision of the MAP within ……days of receiving instructions from the CCIT / DGIT
a) 120 days
b) 10 days
c) 60 days
d) 90 days
CA Final International Taxation Transfer Pricing MCQs
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