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Page 1: Current Affairs MCQs [23th+24th September 2017] · PDF fileCurrent Affairs MCQs ... 1. Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that ... corporate

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

Sumant Kumar, B.Tech NIT Allahabad [email protected]

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The Finance Ministry made public the final guidelines on the Place of Effective Management (POEM), underlining the government’s 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

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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 company’s 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

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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

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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 Earth’s 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 Earth’s 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 Earth’s climate – Volcanic aerosol layer which forms in the stratosphere after major volcanic eruptions, desert dust and human-made aerosols.

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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 inventory), and allows policymakers to compare emissions reduction opportunities across sectors and gases.

UPSC Prelims 2015 Which one of the following is associated with the issue of control and phasing out of the use of ozone-depleting substances? (a) Bretton Woods Conference (b) Montreal Protocol (c) Kyoto Protocol (d) Nagoya Protocol Ans B

Montreal Protocol on Substances that Deplete the Ozone Layer • a protocol to the Vienna Convention for the

Protection of the Ozone Layer. • is an international treaty designed to protect

the ozone layer by phasing out the production of numerous substances that are responsible for ozone depletion.

Which of the following statements is/are correct regarding Ozone? • It is one of the primary components of

photochemical smog. • It is naturally present in the Troposphere in

traces. • It is created due to photo-chemical reaction

between nitrogen oxides and volatile organic compounds.

Select the correct answer using the code given below. (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3Ans D While stratospheric ozone shields us from ultraviolet radiation, in the troposphere, it is naturally present in traces. It damages forests and crops; destroys nylon, rubber, and other materials; and injures or destroys living tissue. It is a particular threat to people who exercise outdoors or who already have respiratory problems.

Consider the following statements regarding Ozone : • Tropospheric ozone is formed by the interaction of

sunlight, particularly ultraviolet light, with hydrocarbons and nitrogen oxides.

• Stratospheric ozone shields us from ultraviolet radiation

• Tropospheric ozone damages forests and crops; destroys nylon, rubber, and other materials; and injures or destroys living tissue.

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 3Ans D • Tropospheric ozone is formed by the interaction of

sunlight, particularly ultraviolet light, with hydrocarbons and nitrogen oxides, which are emitted by automobiles, gasoline vapours, fossil fuel power plants, refineries, and certain other industries. Thus It is created due to photo-chemical reaction between nitrogen oxides and volatile organic compounds. Also, it forms a photochemical smog, as it is a result of the interaction of sunlight with certain chemicals in the atmosphere.

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Consider the following statements regarding Mass Rapid Transit System 1. Rapid transit is a type of high-capacity public transport generally found

in urban areas. 2. Unlike buses and trams, rapid transit systems operate on an exclusive right-

of-way which is usually grade separated in tunnels or elevated railways. 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

Open defecation leads to?

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1. Infection 2. Stunted growth of children 3. High child mortality 4. A massive economic cost due to ill health

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

Causes of Refugee Crisis : 1. War(Bangladesh) 2. Domestic conflicts(Tibet,

Srilanka) 3. Natural disaster(famine) 4. environmental displacement 5. human trafficking 6. climate change

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

India is home to diverse groups of refugees, ranging from 1. Buddhist Chakmas from the Chittagong

Hill Tracts of Bangladesh 2. Bhutanese from Nepal 3. Muslim Rohinygas from Myanmar 4. small populations from Somalia, Sudan

and other sub Saharan African countries. 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

Down To Earth Around 20% of crop residue in India is burnt annually. Which of the following is/are some of the reasons for this, despite the practice being banned?

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1. Shortage of agricultural labour 2. Short interval between crops 3. Mechanisation of farming Select the correct answer using the code given below: a) 1 and 2 only b) 2 only c) 1 and 3 only d) 1, 2 and 3 Solution: d. • Farm mechanisation has killed the practice of using wheat stalk and straw as

fodder, and burning is the only way out. • “The cuttings left by the machines are too sharp. Not only do they injure us, even

animals find it difficult to graze on,”

Which one of the following is NOT a greenhouse gas generated from rice paddy fields? a) Nitrous Oxide b) Hydrofluorocarbons c) Methane d) Carbon Dioxide Solution: b. The Standing Committee on Agriculture : • "paddy fields are a major source of greenhouse gases in the farm sector.

• These gases include methane, nitrous oxide and carbon dioxide.

• reduction of emissions of these greenhouse gases would help India meet obligations under the International Accord on Climate Change.”

no research documents list HFC as an emission from paddy fields. Importantly, HFCs have no natural sources, and are known to be emitted through industrial processes. Consider the following statements: 1. The share of area sown using certified seeds out of the total area sown is called the seed replacement ratio 2. The seed replacement ratio in India is around sixty-five per cent 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 Solution: a.

The Standing Committee on Agriculture • "availability of good quality of seeds ensures high

productivity of agriculture.

• Share of area sown using certified or quality seeds out of the total area sown is called the seed replacement ratio.

• "this ratio is skewed as 65% of the seed requirement is met by farmers’ own seeds or seeds distributed among themselves.

• "the private sector contributes to 50- 57% of the seed production in India."

• "high yielding varieties of improved seeds need to be developed. "

• it recommended that the process of production, procurement and distribution of these improved seeds should be centralised.

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