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  • 23 24

    Current Affairs MCQs [23th+24th September 2017] PIB TheHindu IndianExpress & Other leading newspapers

    Sumant Kumar, B.Tech NIT Allahabad sumant.magadh@gmail.com

  • The Finance Ministry made public the final guidelines on the Place of Effective Management (POEM), underlining the governments intent to target shell companies created to keep income out of India even when real management is taking place within the country Consider the following about a shell company : 1. It is an incorporated company with no significant assets or operations, often formed

    to obtain financing before beginning actual business, or as a front tax evasion. 2. Multinational businesses have been known to set up shell companies in countries

    with super-low corporate tax rates. 3. They do their international operations through their shell, thus not having to report

    to the country (where their operations are taking place) the sums involved, and considerably reduce their tax bill

    Which of the statements given above is/are correct? (a) 1 and 2 only (b) 2 and 3 only (c) 3 only (d) 1, 2 and 3 Ans D What is POEM? The Place of Effective Management is defined in the Income Tax Act to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made A company will be deemed to be engaged in active business outside India if the passive income is not more than 50% of its total income and less than 50% of its total assets are situated in India, less than 50% of the total number of employees are situated in India or are resident in India, and the payroll expenses on such employees is less than 50% of the total payroll expenditure What is Passive income? Passive income is, income from the transactions where both the purchase and sale of goods is from/to its associated

    enterprises and income by way of royalty, dividend, capital gains, interest or rental income Exception: This definition, however, will not apply in the case of a banking company or public financial

    institution o Targeting only shell companies: This clarifies that the intent is not to target Indian multinationals

    which are engaged in business activity outside India, but to target shell companies and companies

  • which are created for retaining income outside India although real control and management of affairs is located in India

    What is a Head office? Head Office of a company would be the place where the companys senior management and their direct

    support staff are located or, Amendment in DTAA b/w India and Mauritius {12 May 2016} [Rev 26 Nov 2016] India and Mauritius have signed a protocol to amend the Double Taxation Avoidance Agreement treaty. Amendments in DTAA : GoI will now tax Capital gains on

    investments from Mauritius. o gives India the right to tax capital

    gains arising from sale or transfer of shares of an Indian company acquired by a Mauritian tax resident

    It will also apply to Singapore treaty

    Why amendment was needed : India and Mauritius had signed a DTAA in 1983. The pact allowed only Mauritius to tax capital

    gains. However, Mauritius impose nearly zero capital

    gains tax. This meant that companies gaining from investments made in Indian companies via Mauritius-based entities managed to avoid paying taxes in both countries.

    Indians avoiding taxes set up shell companies in Mauritius, concealing identities and channeling cash or stock market investments through round tripping and participatory notes.

    DTAA made Mauritius the biggest source of FDI into India.

    Many private equity and venture capital firms also invest in India through funds registered in Mauritius.

    A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius than from many major and mature economies like UK and France. Why? [UPSC Prelims 2010] (a) India has preference for certain countries as regards receiving FDI (b) India has double taxation avoidance agreement with Mauritius (c) Most citizens of Mauritius have ethnic identity with India and so they feel secure to invest in India (d) Impending dangers of global climatic change prompt Mauritius to make huge investments in India 33. (b

    Which of the following can be Implications of the Amendment in DTAA b/w India and Mauritius: o Mauritius may cease to be preferred route for

    FDI and portfolio investments into India. o foreign investments will be affected. o There will not be any incentive for creating a

    shell company in Mauritius for tax evasion. o This will ensure India's conformity to OECD

    and G-20 guidelines on tackling BEPS Select the correct answer using code given below. (a) 1 and 3 only (b) 2 and 4 only (c) 1, 2 and 3 only (d) 1, 2, 3 and 4 Ans D

    Amendment in DTAA b/w India and Mauritius may tackle the issues of o treaty abuse, round tripping of funds o curb revenue loss. o prevent double non-taxation.

    Which of the following are the possible problems that can be created with the amendment in DTAA : o Rise in FDI o Routing of money could be done via other

    jurisdictions like Cyprus and Netherlands

  • o will help curb tax evasion and tax avoidance.

    o discourage speculators and non-serious investors, and thereby reduce volatility in the market.

    Select the correct answer using code given below. (a) 1 and 3 only (b) All of the above (c) 1, 2 and 3 only (d) 1, 2, 3 and 4 Ans D

    o Presence of opaque methods of investments in debts and share instruments like P-Notes.

    Which of the statements given above is/are correct? (a) 1 and 2 only (b) 2 and 3 only (c) 3 only (d) 1, 2 and 3 Ans B Fall in FDI Together Mauritius and Singapore constitute 50% of FDI flow in India

    Consider the following statements regarding BEPS : 1. Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that

    exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

    2. BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNEs).

    Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Ans C

    All States including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%.

    Balance 51% equity is with non-Government financial institutions.

    Goods and Services Tax Network (GSTN) 1. It is a not for profit, non-

    Government, private limited company incorporated in 2013.

    2. The Government of India holds majority equity in GSTN

    3. States also has shareholding in the GSTN

    Which of the statements given above is/are correct? (a) 1 and 3 only (b) 1, 2 and 3 (c) 3 only (d) 2 and 3 Ans A The Government of India holds 24.5%equity in

    GSTN

  • Goods and Services Tax Network (GSTN) 1. The Company has been set up primarily

    to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST).

    2. After rolling out of GST, the Revenue Model of GSTN shall consist of User Charge to be paid by stakeholders who will use the system and thus it will be a self-sustaining organization.

    Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Ans C

    The Goods and Services Tax Network (GSTN) is established to provide IT infrastructure and services to the Central and State Governments, taxpayers and other stakeholders for implementation of the Goods and Services Tax (GST). It is a a) Non-Government, private limited company b) Public, government of India undertaking c) Special purpose vehicle entirely funded by Indian government d) None of the above Solution: a)

    Aerosols can 1. Scatter sunlight directly back into space 2. Modify the size of cloud particles, thereby changing how clouds reflect and absorb sunlight 3. Be found in the Stratosphere Select the correct answer using the code given below: a) 1 and 2 only b) 2 and 3 only c) 1 and 3 only d) 1, 2 and 3 Solution: d.

    o Aerosols interact both directly and indirectly with the Earths radiation budget and climate. As a direct effect, the aerosols scatter sunlight directly back into space. As an indirect effect, aerosols in the lower atmosphere can modify the size of cloud particles, changing how the clouds reflect and absorb sunlight, thereby affecting the Earths energy budget.

    o Aerosols also can act as sites for chemical reactions to take place (heterogeneous chemistry). The most significant of these reactions are those that lead to the destruction of stratospheric ozone.

    o Three types of aerosols significantly affect the Earths climate Volcanic aerosol layer which forms in the stratosphere after major volcanic eruptions, desert dust and human-made aerosols.

  • Global Warming Potential (GWP) is a measure of how much energy the emissions of one ton of a gas will absorb over a given period of time, relative to the emissions of one ton of a) Methane b) Nitrous Oxide c) Ozone d) Carbon Dioxide Solution: d. The larger the GWP, the more that a given gas warms the Earth compared to CO2 over that time period. The time period usually used for GWPs is 100 years. GWPs provide a common unit of measure, which allows analysts to add up

    emissions estimates of different gases (e.g., to compile a national GHG inve

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