School of Management and Commerce

Question Bank - Unit no.: IV

Program: B.Com (H)
Course Name: CORPORATE TAX PLANNING Course Code: 21BCOH 504
Academic year: 2023- 2024 Semester: 5 Year: 3rd
Level A. Easy Questions (2 marks each)

S. No. Questions CO*

Q1
D.K. What are the examples of specified domestic transactions?
SDT includes payments to related parties, inter-unit transfer of goods or
services of profit linked tax holiday-eligible units, transactions of profit-
linked tax holiday-eligible units with other parties and any other transaction
that may be notified by the Central Board of Directors.
Q2 What are related party transactions in tax audit report?
A related party transaction is a two-party contract which is
accompanied by a pre-existing business relationship or mutual
interest.
For example, it would be a related party agreement to have a
contract between a major shareholder of a company and the
company if such shareholder agrees to renovate the offices of the
company.
It extends to the firm or private company in which this director or the
manager is a partner or shareholder or director. If such company is a public
company, then it will be termed as a related party if the director/relative
holds more than 2% of its paid-up capital.
Q3 Can we reduce STT from capital gains?
Expenses such as brokerage, stamp duty, sales commission, etc. can be
claimed as an expense in your Income Tax Return. All these expenses
are allowed as deductions only for the purpose of calculating the Capital
Gains. However, Securities Transaction Tax (STT) is not allowed as a
deduction.
Q4 What type of tax is STT?
STT or Security Transaction Tax is a type of tax that is charged on the
purchase and sale of securities like stocks, mutual funds, and derivatives
on recognized stock exchanges in India. The STT is a direct tax,
meaning that it is levied directly on the transaction value of securities.
Q5 What is security as per income tax rule
Security is a financial instrument denoting various financial
assets. It is denoted by fixed face value and held in the demat
form.
 Understanding Security
Securities carry a monetary value. The broad categories of
securities include equity, debt and hybrid securities. Corporations
raise money from through public and private means from
the sale of securities. Equity represents an ownership interest in a
public enterprise.
A public issue can comprise of equity issue through Initial Public
Offering (IPO), further issue of capital or issue of any other
securities.

Q6 What is the limit for specified domestic transactions?

In other words, in order to consider a transaction as specified domestic
transaction, such transaction shall not be covered under the definition of
'international transaction' as defined under Section 92B and the
aggregate value of transactions as referred above shall exceed INR 20
Crore in the year
Q7 Which transactions are not regarded as transfer?
any transfer of a capital asset, being any work of art, archaeological, scientific or
art collection, book, manuscript, drawing, painting, photograph or print, to the
Government or a University or the National Museum, National Art Gallery,
National Archives or any such other public museum or institution as may be
notified40 by the Central Government in the Official Gazette
Q8 Who issued the income tax clearance certificate?
the Department of Revenue
A Tax Clearance Certificate is a statement made by the tax authorities
that the taxpayer has paid all his outstanding tax debts or is not
responsible for paying any taxes. A Tax Clearance Certificate is, in
essence, a document issued by a state government department, typically
the Department of Revenue.
Q9 What is the meaning of specified domestic transaction?
What is Transfer Pricing? Transfer pricing refers to the prices of goods and
services that are exchanged between companies under common control.
For example, if a subsidiary company sells goods or renders services to its
holding company or a sister company, the price charged is referred to as
the transfer price.
Specified domestic transactions are transactions
connected with transfer pricing. They do not include an
international transaction.
Q10 How to Obtain a GST Clearance Certificate
(COMPLIANCE-: conformity in fulfilling official requirements)
Step 1: GST Registration. ...
Step 2: GST Compliance. ...
Step 3: Regular GST Filing. ...
Step 4: Monitor Your Compliance. ...
 Step 5: Request for a Clearance Certificate. ...
Step 6: Verification by Tax Authorities. ...
Step 7: Issuance of GST Clearance Certificate
Q11 How can I get GST certificate by PAN number?
Step 1– Visit the GST portal.
Step 2– Click on “Search Taxpayer” tab.
Step 3– Select “Search by PAN” option.
Step 4- To use the GST number search tool, enter the PAN
number of the dealer and captcha code reflecting on the screen.
Step 5- Click on “Search”.

Q12 How long will it take to get GST certificate?

"If the documents and authentication are found complete after
verification and Aadhaar authentication, then the GST Registration
certificate and GSTIN is issued within seven working days from the date
of submission of the GST registration application,
Q13 What is jurisdiction (ADHIKAARIK STHAAN) details?
Jurisdiction is the geographical area for which an Assessing Officer can assess
requests. It is usually connected with the Permanent Account Number (PAN).
However, if there is any change in address or city, there might be a change in the
Assessing Officer.
It is very common for people to do relocation to new places due to professional or
other reasons. Relocation results in changing of their residential addresses. After
that, many other aspects need to be modified and updated for filing the Income
Tax Returns.
Q14 What is the judicial anti-avoidance rule?
General Anti-avoidance Rule (GAAR) is a concept which generally
empowers the Revenue Authority in a country to deny tax benefit of
transactions or arrangements which do not have any commercial
substance and the only purpose of such a transaction is achieving the tax
benefit.
General Anti-Avoidance Rules (GAAR) are statutory or judicially
developed (doctrine) rules that empower tax authorities to deny
taxpayers the benefit of abusive schemes, arrangements or transactions
where these has been entered into primarily for tax-avoidance purposes
Q15 Is PAN card required for GST?
Yes, a PAN card is compulsory to obtain GST registration. If one doesn't
have the PAN card, they need to obtain one before applying for the GST
registration, except in the case of TDS tax deducted at source
registration under GST which is allowed with a TAN
Q16 Does GST certificate expire?
The certificate does not have any time limit for expiry if issued to all the
regular taxpayers. As long as the GST registration is valid and not
surrendered or cancelled, it remains valid
Q17 How much turnover required for GST?
40 Lakhs (for goods) and Rs. 20 lakhs (for services) are required to
register for GST and pay taxes on their taxable goods and services.
Businesses with a yearly turnover of less than Rs. 40 Lakhs are not
required to register for GST, but can choose to register for GST
voluntarily.
Q18 Who has to pay GST?
In general, the supplier of goods or services is liable to pay GST.
However, in specified cases like imports and other notified supplies, the
liability may be cast on the recipient under the reverse charge
mechanism.
Q19 What are the 4 types of GST?
CGST
SGST
IGST
UTGST
Q20 What is final return in GST?
A taxable person whose GST registration is cancelled or surrendered has to file a
return in Form GSTR-10 called as Final Return. This is statement of stocks held by
such taxpayer on day immediately preceding the date from which cancellation is
made effective.
Annual return has to be filed by every registered person under GST. Annual return
is to be filed once a year in Form GSTR-9.
Final return is required to be filed by the persons whose registration has been
cancelled or surrendered in Form GSTR-10.

Level B. Intermediate Questions (5 marks each)

Q21 Who is a person located in jurisdiction 94A?

94A (6) describes a ‘person’ in a Notified Jurisdictional Area as –
 An individual residing in a Notified Jurisdictional Area.
 Any permanent establishments of an individual in a given Notified
Jurisdictional Area.
 Individuals with an establishment in the Notified Jurisdictional
Area.

This section empowers the government and its agencies to blacklist foreign
tax jurisdictions where a proper system for exchange of tax information is
not in place. It authorises them to penalize the taxpayer in India and the
non-resident located in the other country in a foreign jurisdiction

Q22 What is notified jurisdictional areas?

As per the norms of Section 94A of Income Tax Act, the government of
 India has the authority to notify countries or islands that refrain from
sharing valuable tax-related information as Notified Jurisdictional Area.
Q23 What are the 5 related-party transactions?
Examples of common transactions with related parties are:
• Sales, purchases, and transfers of real and personal property.
• Services received or furnished, such as accounting, management,
engineering, and legal services.
• Use of property and equipment by lease or otherwise.
• Borrowings, lendings, and guarantees.
Related-party transactions involve business dealings between entities
that have a close relationship due to ownership, control, or other
affiliations. Five common types of related-party transactions are:

1. **Sale or Purchase of Goods:**

- Transactions involving the sale or purchase of goods between
entities with a close relationship, such as a parent company and its
subsidiaries.

2. **Leasing Arrangements:**
- Leasing of property, equipment, or other assets between related
parties, such as renting office space from a subsidiary.

3. **Service Agreements:**
- Provision of services, such as management or consulting services,
between entities with a close relationship.

4. **Lending or Borrowing Transactions:**

- Transactions involving the lending or borrowing of funds
between related parties, such as loans from a parent company to its
subsidiaries.

5. **License Agreements:**
- Agreements allowing the use of intellectual property, trademarks, or
 proprietary assets between entities with related-party relationships.
Q24 What is the difference between a domestic transaction and an international
transaction?

Domestic Business International Business

Definition

Domestic business involves those economic International business involves those

transactions that take place within the economic transactions that take place outside
geographical boundaries of a country. the geographical boundaries of a country.
Buyer and Seller

Both the buyer and seller belong to the The buyer and seller belong to different
same country in domestic business. countries in international business.
Currency

Domestic businesses deal with the same International businesses deal with different
currency since both the buyer and seller are currencies since the buyer and seller are not
from the same country. from the same country.
Customers

There is greater homogeneity in terms of the There is greater heterogeneity in terms of the
nature of customers of domestic businesses. nature of customers of international
businesses.
Geographical Boundaries

Geographical boundaries limit domestic Geographical boundaries do not limit

businesses. international businesses.
Business Research

Business Research is less complex and Business Research is more complex and
relatively cheaper for domestic businesses relatively expensive for international
compared to international organisations. businesses compared to domestic
companies.
Capital Investment

Capital investment is lower for companies Capital investment is higher for companies
that are involved in domestic business. that are involved in international business.
Factors of Production

The domestic business has greater mobility The international business has lesser mobility
of factors of production compared to of factors of production compared to
 international business. domestic business.
Restrictions

Domestic business involves lesser International business involves greater

restrictions than international business. restrictions than domestic business.
Quality Standards

The quality standards for domestic business The quality standards for international
tend to be relatively lower than international business tend to be relatively higher than
business. domestic business.
Q25 What is the general anti-avoidance rule in India?
The General Anti-Avoidance Rule (GAAR) is an anti-tax avoidance
law in India. It came into effect on 1st April 2017. In this article, we
present all the important information about this law for the IAS exam.
This comes under both the economy and governance sections of
the UPSC syllabus.

General Anti-Avoidance Rule –

Introduction
 The GAAR provisions come under the Income Tax Act, 1961.
 The Department of Revenue under the Finance Ministry frames the
rules under GAAR.
 It is specifically aimed at cutting revenue losses that happen to the
exchequer due to aggressive tax avoidance measures practiced by
companies.
 GAAR was initially proposed in the Direct Tax Code 2009, although it
was introduced into India in the Budget session of Parliament in 2012.
 A committee under Parthasarathy Shome was set up to review the
proposals. It recommended deferring the proposals to three more
years citing a need to establish the administrative machinery
necessary and training for officials for a full-scale implementation.
 It came into effect in 2017 and is applicable from the assessment year
2018 – 19.

GAAR was first introduced in the Direct Taxes Code Bill 2010. The
original proposal gave the Commissioner of Income Tax the authority to
declare any arrangement or transaction by a taxpayer as 'impermissible' if
he believed the main purpose of the arrangement was to obtain a tax benefit
Q26 What is the main objective of GAAR?
? General Anti-Avoidance Rules(GAAR) is a tool for checking aggressive
tax planning especially those transactions or business arrangements which
 The main objective of General Anti-Avoidance Rules (GAAR) is to prevent
taxpayers from engaging in aggressive tax avoidance strategies by imposing
a penalty or denying tax benefits for transactions that are deemed to be
artificial or lacking in substance. GAAR is designed to counteract tax
avoidance schemes that comply with the literal interpretation of tax laws
but violate their underlying principles.are entered into with the objective of
avoiding tax.

Q27 Is it compulsory to pay securities transaction tax?

Yes, in India, it is compulsory to pay Securities Transaction Tax
(STT) on specified transactions in the securities market. The
Securities Transaction Tax is a tax levied on the sale or transfer
of securities listed on recognized stock exchanges. It is governed
by the Securities Transaction Tax Act, 2004.

Key points regarding the Securities Transaction Tax:

1. **Applicability:**
- STT is applicable to transactions in equity shares, derivatives
(equity and commodity), units of equity-oriented mutual funds,
and specified securities traded on stock exchanges.

2. **Scope:**
- The tax is levied on both the buyer and the seller, but the
rates may vary for different types of transactions.

3. **Rates:**
- The rates of STT are determined by the government and are
subject to change. As of my last knowledge update in January
2022, the rates for equity delivery transactions and equity
futures and options transactions were different.

4. **Collection Mechanism:**
- Stock exchanges collect STT at the time of the transaction
and pass it on to the government.

5. **Exemptions:**
- Certain transactions, such as off-market transactions
(transactions not conducted on the stock exchange) and specific
types of securities, may be exempt from STT.

6. **Compliance:**
 - Compliance with STT regulations is mandatory, and failure
to pay the required tax may result in penalties and legal
consequences.

It's essential for investors and market participants to be aware of the

prevailing rates and regulations related to STT as they engage in
securities transactions. Since tax laws and rates can be subject to
changes, individuals are advised to consult with tax professionals or
refer to the latest tax guidelines for the most current information.
Q28 Who Requires an Income Tax Clearance Certificate, and When Is It
Required?
According to the Indian Income Tax Laws, anyone who is not an
Indian citizen is present in the country on business, employment, or
other official business and derives any income from India must
acquire an Income Tax Clearance Certificate before departing the
country or returning home.
In essence, this means that foreign nationals in India on business
and who also receive income from India should apply for an Income
Tax Clearance Certificate in India before leaving for their home
country.
If a person meets all 3 of the following criteria and is departing the
country, they must obtain an Income Tax Clearance Certificate-
a) They are not a resident of India
b) Has traveled to India for work, business, or other purposes
c) Receives income from anywhere in India
Q29 How To Obtain an Income Tax Clearance Certificate?
Individuals can file a proclamation (घोषणा) with their employer in
India or with the person from whom they receive their income if
they want to acquire an Income Tax Clearance Certificate.
Additionally, when requesting the ITCC from the jurisdictional tax
officer, a non-resident of India must submit an undertaking in the
required format, Form 30A. This commitment must come from the
concerned person's employer or the person through whom they
receive their income, and it must state that they will be responsible
for paying any taxes that may become due by the ex-pat (foreigner)
after leaving the country.
If the income tax officer is satisfied with the information provided, they
will issue the ITCC in Form 30B upon receiving such an undertaking and
the pertinent documents. The document will make mention of the ITCC's
validity
Q30 What Happens If the Income Tax Clearance Certificate is Not Submitted?

A non-resident leaving the country needs to clear all their tax

 dues, if any, before their departure from India. Now, if such a
person doesn’t submit their ITCC, two conditions may arise.

 The aircraft or ship taking them out of the country must

check all the necessary documents before it takes off.
In case of failure, they become personally liable for any
tax dues on behalf of the non-resident.

 If the individual is leaving the country through any

privately owned carriage, it is their responsibility to clear
their dues. They also need to obtain ITCC before their
departure. Failing to do so, the Tax Authority of India
can take all necessary measures to recover the tax due.

Level C. Difficult Questions (10 marks each)

Q31 When and who needs an income tax clearance certificate? How can I get clearance
certificate from income tax department?

Income Tax Clearance Certificate is a document that verifies that the

individual has cleared all their tax duties and is not responsible for paying
any taxes, and will take incharge of any tax liabilities that may occur in the
future. The state government’s revenue department issues this document
and confirms that the company or the person is complied with their tax
obligations as of a specific date.

The certificate may cover sales tax, use tax, the franchise of corporation
tax, unemployment tax, etc., depending on the state’s tax regulations.

If the income tax officer gets satisfied with the information provided, ITCC
will be issued in form 30B.

This document will also contain information about ITCC’s validity.

Anyone who is not an Indian citizen is present in the country on business,

 employment, or other official business and derives any income from India
must acquire an Income Tax Clearance Certificate before departing the
country or returning home.

Q32 What do you mean by securities transaction tax? Is STT exempted from
income tax?
The STT full form is the Securities Transaction Tax (STT), and it is a type
of financial transaction tax payable in India on every purchase or sale of
securities that are listed on the Indian stock exchanges. The two main
stock exchanges are the National Stock Exchange, or the NSE, and the
BSE, or the Bombay Stock Exchange. This would include shares,
derivatives or equity-oriented mutual funds investment units.
As per Sec 36 of Income Tax Act 1961, STT can be claimed under
income tax if the STT amount which you have paid is allowed as
business expenditure provided you are showing share income
under the head "Profits/Gains from Business and Profession" i.e. if
trading of stocks is being made as a professional choice and is
being carried out from business point of view.
However if an assessee is a salaried or self-employed person who
deals in stock transactions only for investment purposes and
trading in securities is not what he does as his main line of
profession, then Gains or losses in such cases can be grouped
as short-term capital gains or long-term capital gains depending
upon the period for which the stocks are held. And such people
cannot claim STT under Income Tax.
At the end of the year, we provide a certificate of the STT that you
have paid through the year. You can get a tax credit, as per
conditions mentioned above. STT is a quick, effective and
transparent tax. This is a unique tax that gets levied as soon as a
transaction transpires.

Q33 How is Securities Transaction Tax Calculated

Derivatives
STT for derivatives is computed at 0.01% on the sale transaction value. The seller
is liable for paying the Securities Transaction Tax rate based on the entire
transaction value.
Equity Shares
STT is assessed at a rate of 0.1% on the selling transaction's transaction value for
equity shares. The seller is responsible for paying the STT based on the entire
transaction value.
Exchange Traded Funds (ETFs)
STT is levied at a rate of 0.001% on the transaction value of the selling
transaction for ETFs. The seller is responsible for paying the STT, computed
 based on the entire transaction value.
Equity-Oriented Mutual Funds
For equity-oriented mutual funds, STT is charged at 0.001% on the redemption
value of the units. The STT is calculated on the redemption value and is paid by the mutual
fund house.
Q34 How much is Securities Transaction Tax levied in India?.
Here are the current STT rates applicable in India as of May 2023:
Equity delivery - 0.1% on the transaction value
Equity futures - 0.01% on the sell-side transaction value
Equity intraday - 0.025% on the sell-side transaction value
Equity options - 0.05% on the sell-side premium value
Currency options - 0.05% on the sell-side premium value
Currency futures - 0.01% on the sell-side transaction value
Commodity futures - 0.01% on the sell-side transaction value
Q35 The StT Charge and Its Features
Features of Securities Transaction Tax
STT is a simple direct tax and is not very complicated to calculate or levy. Some
of the most distinguishing features of STT are as listed below.
 STT charge is levied on all sell transactions for both options as well as futures
 For purpose of STT calculation, each future trade is valued at the actual traded
price while each option trade is valued at premium
 The amount STT that a clearing member has to pay is the sum total of all the STT
taxes of trading members under him

36 STT Exemption under Income Tax:

. As per Sec 36 of Income Tax Act 1961, STT can be claimed
under income tax if the STT amount which you have paid is
allowed as business expenditure provided you are showing share
income under the head "Profits/Gains from Business and
Profession" i.e. if trading of stocks is being made as a professional
choice and is being carried out from business point of view.
However if an assessee is a salaried or self-employed person who
deals in stock transactions only for investment purposes and
trading in securities is not what he does as his main line of
profession, then Gains or losses in such cases can be grouped as
short-term capital gains or long-term capital gains
depending upon the period for which the stocks are held. And
such people cannot claim STT under Income Tax.
At the end of the year, we provide a certificate of the STT that you have
paid through the year. You can get a tax credit, as per conditions
mentioned above. STT is a quick, effective and transparent tax. This is a
unique tax that gets levied as soon as a transaction transpires. There is,
hence, no hassle of noncompliance or non-payment, or of any incorrect
payment.