Mock Test Paper - Series I: March, 2025

Date of Paper: 17 th March, 2025

Time of Paper: 2 P.M. to 5 P.M.

FINAL COURSE: GROUP – II

PAPER – 4: DIRECT TAX LAWS & INTERNATIONAL TAXATION
Division A – Multiple Choice Questions
Answer Keys
MCQ Answer
No.
1. (c) ` 10,000 and ` 1,56,000, respectively
2. (b) Kishor and Bablu
3. (d) ` 1,02,000
4. (c) ` 8,61,507
5. (c) (i) and (iii)
6. (a) ` 1,16,25,000
7. (d) Either (b) or (c)
8. (c) Interest of ` 15,40,313 has to be added to its total income for
P.Y.2026-27
9. (d) Since X has not reported the transaction as an international
transaction, X will be considered to have misreported its
income and penalty will be 200% of the amount of tax payable
on the misreported income
10. (d) Equalization levy of ` 33,000 is deductible by Smile Ltd. and
penalty of ` 33,000 is attracted for non-deduction
11. (b) ` 42,000. However, the said amount would not be subject to
any tax.
12. (c) Either (a) or (b)
13. (b) No, deduction would not be allowed as such expenditure is of
capital nature
14. (d) No; registration cannot be cancelled, and the value of benefit
provided to Mr. Ranbir would be deemed as income of the trust.
15. (c) ` 1,14,33,010

1
 Division B – Descriptive Choice Questions
1. Computation of Total Income of Narmada Ltd. for the A.Y.2025-26
Particulars Amount (`)
Profits and Gains from Business and Profession
Net profit as per profit and loss account 3,50,00,000
Add: Items debited but to be considered separately or to
be disallowed
Fees paid to directors without deducting tax at source 30,000
[Disallowance@30% would be attracted under section
40(a)(ia) for non-deduction of tax at source from director’s
remuneration on which tax is deductible under section 194J]
Depreciation provided on straight line basis 50,00,000
[Depreciation provided in the accounts on straight line basis
(i.e., ` 50 lakhs) has to be added back]
Contribution to a National Laboratory Nil
[Contribution to a National Laboratory under section 35(2AA)
qualifies for deduction@100%].
GST liability 2,10,000
[GST liability of ` 2.10 lakhs would attract disallowance under
section 43B, since it was paid only on 27.12.2025 (i.e., after
the due date of filing return of income of A.Y.2025-26). It
would be allowed in the year of payment (i.e., P.Y.2025-26).
Hence, it has to be added back for computing business
income]
Disallowance under section 40A(2) for excess payment to 5,00,000
related person
[Saraswati Ltd. is a related person under section 40A(2),
since the directors of Narmada Ltd. have substantial interest
in Saraswati Ltd. Therefore, excess payment of ` 5 lakh to
Saraswati Ltd. for purchase of goods would attract
disallowance under section 40A(2).]
Disallowance under section 40A(3) for payment 5,00,000
exceeding ` 10,000 made in cash for purchases and
expenditure
[Cash payments exceeding ` 10,000 a day attracts
disallowance under section 40A(3). Accordingly, cash
payment of ` 5 lakhs made on 17-8-2024 would attract

2
disallowance under section 40A(3), even if such payment is
made due to demand of supplier]
Disallowance under section 40A(3) for cash payment 92,000
exceeding `35,000 in a day to transport operators for
hiring of lorry
[In respect of cash payments to transport operators, a higher
limit of ` 35,000 per day is permissible. Therefore, cash
payment of ` 35,000 on 03-07-2024 would not attract
disallowance under section 40A(3). However, cash payments
of ` 40,000 and ` 52,000 on 06-06-2024 and 15-01-2025,
respectively, would attract disallowance under section 40A(3)
since the same exceeds ` 35,000 per day]
Legal expenses for issue of bonus shares -
[There is no fresh inflow of funds or increase in capital
employed on account of issue of bonus shares and there is
only reallocation of the company’s fund. Consequently, since
there is no increase in the capital base of the company, legal
expenses of ` 5 lakhs in connection with issue of bonus
shares is revenue expenditure and is hence, allowable as
deduction. It has been so held by Apex Court in case of CIT
vs. General Insurance Corpn. (2006) 286 ITR 232.
Legal expenses for issue of right shares 4,00,000
` 4 lakhs, being legal expenses in relation to issue of rights
shares results in expansion of the capital base of the
company and is, hence, a capital expenditure. Therefore, the
same is not allowable as deduction. It has been so held in
Brooke Bond India Ltd. v. CIT (1997) 225 ITR 798 (SC)]
Donation to a registered political party 17,00,000
[Donation paid to a political party is not an allowable
expenditure under section 37 since it is not laid out wholly or
exclusively for the purposes of business or profession.
Hence, the same has to be added back while computing
business income.

3
Bad debt written off earlier, recovered now 2,00,000 86,32,000
[The amount of bad debt written off earlier when recovered
subsequently, such recovery is taxable under section 41(4)]
4,36,32,000
Less: Items credited but to be considered separately or
to be allowed/ Expenditure to be allowed
Depreciation allowable under the Income-tax Act, 1961 62,00,000
[Depreciation calculated as per Income-tax Rules, 1962 (i.e.
` 62 lakhs) is allowable as deduction under section 32]
Over-valuation of stock [` 55 lakhs x 10/110] 5,00,000
[The amount by which stock is over-valued has to be reduced
for computing business income. ` 50 lakhs, being the
difference between closing and opening stock, has to be
adjusted to remove the effect of over-valuation]
67,00,000
Gross Total Income 3,69,32,000
Less: Deduction under Chapter VI-A
Donation to registered political party [under section 17,00,000
80GGB
[Donation made by a company to a political party is allowable
deduction under section 80GGB from gross total income,
subject to the condition that payment is made otherwise than
by way of cash. Since the donation is made by cheque the
same is allowed as deduction under section 80GGB]
Total Income 3,52,32,000
Computation of tax liability of Narmada Ltd. for A.Y.2025-26
Particulars `
Tax@25% on total income of ` 3,52,32,000 88,08,000
[Since the total turnover or gross receipt in P.Y. 2022-23 ≤ 400 crore]
Add: Surcharge@7% (since total income exceeds ` 1 crore but does
not exceed ` 10 crores) 6,16,560
Tax payable including surcharge 94,24,560
Add: Health and Education cess@4% 3,76,982
Total tax payable 98,01,542
Tax payable (Rounded off) 98,01,540

4
2 (a) Computation of total income of PNG LLP

Particulars ` (in lacs)

Profit from Unit A [` 502 lakhs + ` 24 lakhs, being 526
disallowance u/s 43B]
Profit from Unit B [` 753 lacs + ` 47 lacs, being disallowance 800
u/s 40A(3)]
1326
Less: Deduction under section 10AA [See Working Note 174
below]
Total Income 1152
Tax on total income@30% 345.60
Add: Surcharge@12%, since total income > `1 crore 41.47
387.07
Add: Health and Education cess @4% 15.48
Tax liability (as per normal provisions) 402.55
Computation of Adjusted total income and Alternate Minimum tax of
PNG LLP as per the provisions of section 115JC for A.Y. 2025-26
Particulars ` (in lakh)
Total income as per the normal provisions 1152
Add: Exemption under section 10AA 174
Adjusted Total Income 1326
Tax@18.5% of Adjusted Total Income 254.31
Add: Surcharge @12% as the adjusted total 29.44
income is > `1 crore
274.75
Add: Health and Education cess @4% 10.99
Alternate Minimum Tax as per section 115JC 285.74
Since the tax payable as per the normal provisions of the Act is more than the
alternate minimum tax payable, the total income as per normal provisions shall
be liable to tax and the tax payable for A.Y. 2025-26 shall be `402.55 lakhs.

5
Working Note:
Computation of deduction under section 10AA in respect of Unit A located
in a SEZ
Particulars ` (in lacs)
Total turnover of Unit A = 1200
(` 1200 lacs + ` 200 lacs) – ` 200 lacs, being freight and
insurance included therein. Since freight and insurance has
been excluded from export turnover, the same has to be
excluded from total turnover also
Export Turnover of Unit A
Export sale proceeds received in India 1040
Less: Insurance and freight not includible in export turnover 140
900
Profit “derived from” Unit A
Net profit for the year 502

Add: Disallowance under section 43B 24

526
Less: Items of business income which are in the nature of
ancillary profits and hence, do not constitute profit
‘derived from’ business for the purpose of exemption
under section 10AA
Duty drawback 38
Profit on sale of import entitlement 24
62
464
Deduction under section 10AA (6th year of operations)
Export turnover
of Unit A
Profit derived x -----------------------x 50%
from Unit A
Total turnover
of Unit A
= 50% of 464 х 900/1200 = 174

6
 (b) Computation of total income of Lokesh for A.Y. 2025-26 as per section
115BAC
Since Mr. Lokesh is a resident in India for the P.Y.2024-25, his global income
would be subject to tax in India. Therefore, income earned by him in Country A
would be taxable in India.
Particulars Amount (`) Amount (`)
Salaries
Salary from Platinum Ltd. 23,00,000
Less: Standard deduction u/s 16(ia) 75,000 22,25,000
Income from house property
Let out property in Country A
Gross Annual Value1 USD 4,500
Less: Municipal taxes USD 450
Net Annual Value USD 4,050
Less: Deduction under section 24 – 30% of USD 1,215
NAV
USD 2,835
[$ 2,835 x 71, being the last day of previous 2,01,285
year i.e., 31.3.2025 as per Rule 115]
Self-occupied property in India
Loss from self-occupied property [Interest u/s
24(b) is not allowable in respect of self-
occupied property under section 115BAC] -
2,01,285
Profits and gains from business or
profession
Income from business in Country A 17,75,000
[$ 25,000 x 71, being the last day of previous
year i.e., 31.3.2025 as per Rule 115]
Capital Gains
Short term capital gains on sale of shares of 3,50,000
companies registered in Country A
[$ 5,000 x 70, being the last day of the month
immediately preceding the month in which the

1Rental Income has been taken as GAV in the absence of other information relating to fair
rent, municipal value etc.

7
shares are transferred i.e., 28.2.2025 as per
Rule 115]
Income from Other Sources
Interest on bank fixed deposits 1,60,000
Dividend from shares held in Country A 7,00,000
[$ 10,000 x 70, being the last day of the month
immediately preceding the month in which the
dividend is declared i.e., 28.2.2025 as per Rule
115]
8,60,000
Gross Total Income/Total Income 54,11,285
Total Income (Rounded off) 54,11,290
Computation of Net tax liability of Lokesh for A.Y.2025-26
Particulars Amount
Upto ` 3,00,000 Nil
` 3,00,001 – ` 7,00,000 [i.e., ` 4,00,000 @5%] 20,000
` 7,00,001– ` 10,00,000 [i.e., ` 3,00,000 @10%] 30,000
` 10,00,001– ` 12,00,000 [i.e., ` 2,00,000 30,000
@15%]
` 12,00,001– ` 15,00,000 [i.e., ` 3,00,000 @ 60,000
20%]
` 15,00,001– ` 54,11,290 [i.e., ` 39,11,290 @ 11,73,387
30%]
13,13,387
Add: Surcharge@10% [Since total income exceed ` 50 lakhs but
does not exceed ` 1 crore) 1,31,339
14,44,726
Add: Health & Education Cess@4% 57,789
15,02,515
Less: Foreign tax credit, being lower of -
- Tax payable in India @27.767% on 8,40,309
` 30,26,285, being income from house
property of ` 2,01,285, business income
of
` 17,75,000 plus capital gains of
` 3,50,000 plus dividend income of

8
 ` 7,00,000 [i.e ` 15,02,515/ ` 54,11,290
x 100] = 27.767%
- Tax paid in Country A@20% 6,40,800
[$ 44,500 @20% x ` 72, being the rate on
30.4.2024, being the last day of the month
immediately preceding the month in which
tax is paid, i.e., May 2025]
6,40,800
Net tax liability 8,61,715
Net tax liability (Rounded off) 8,61,720

3. (a) As per section 115TD, the accreted income of “Feed the people”, a charitable
trust, registered under section 12AA which merged with an entity not entitled for
registration under section 12AB or approval under section 10(23C), would be
chargeable to tax at maximum marginal rate @ 34.944% [30% plus surcharge
@12% plus cess@4%].
Computation of accreted income and tax liability in the hands of the trust
arising as a result of merger with the “not eligible” entity for A.Y. 2025-26
Particulars Amount (`)
Aggregate FMV of total assets as on 1.4.2024, being the 1,21,00,000
specified date (date of merger) [See Working Note 1]
Less: Total liability computed in accordance with the
prescribed method of valuation [See Working 96,00,000
Note 2]
Accreted Income 25,00,000
Tax Liability @ 34.944% of ` 25,00,000 8,73,600
Working Notes:
(1) Aggregate fair market value of total assets on
the date of merger
- Land, being an immovable property 17,00,000
[The fair market value of land would be higher of `
17 lakhs i.e., price that the land would ordinarily
fetch if sold in the open market and ` 15 lakhs,
being stamp duty value as on the specified date]
- Quoted equity shares in Ink Ltd. [75,000 x ` 80 60,00,000
per share]

9
 [` 80 per share, being the average of the lowest
(` 75) and highest price (` 85) of such shares on
the date of merger]
- 55,000 preference shares of N Ltd.
[The fair market value which it would fetch if sold in
the open market on the date of merger i.e., FMV on 44,00,000
1.4.2024]
1,21,00,000
(2) Total liability
- Outside liabilities 90,00,000
- Corpus Fund of ` 15 lakhs [not includible] -
- Provision for taxation ` 5 lakhs [not includible] -
- Liabilities in respect of payment of various utility
bills [since this liability is an ascertained liability] 6,00,000
96,00,000

(b) Computation of total income of FASHION Inc., a notified FII, for A.Y.2025-26
Particulars ` `
Dividend income 7,15,000
Interest on securities [No deduction is allowable in
respect of expenses incurred in respect thereof] 16,72,000 23,87,000
Long-term capital gains on sale of bonds of
January Ltd.
Sale consideration 58,00,000
Less: Cost of acquisition 33,00,000 15,00,000
[Benefit of indexation is not allowable]
Short-term capital gains on sale of STT paid
equity shares of Exe Ltd.
Sale consideration 14,50,000
Less: Cost of acquisition 9,90,000 4,60,000
Short-term capital gains on sale of unlisted
equity shares of May Ltd.
Sale consideration 7,90,000
Less: Cost of acquisition 3,22,000 4,68,000
Total Income 48,15,000

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 Computation of tax liability of FASHION Inc. for A.Y.2025-26
Particulars `
Tax@20% on interest on securities and dividend = 20% x 4,77,400
` 23,87,000
Tax@10% on long-term capital gains on sale of bonds of January 1,50,000
Ltd. = 10% x ` 15,00,000
Tax @ 20% on short-term capital gains on sale of listed equity
shares of Exe Ltd., in respect of which STT has been paid = 20% 92,000
of ` 4,60,000
Tax @ 30% on short-term capital gains on sale of unlisted equity
shares of May Ltd. = 30% of ` 4,68,000 1,40,400
8,59,800
Add: HEC@4% 34,392
Tax liability 8,94,192
Tax liability (rounded off) 8,94,190

4. (a) (i) Since the consideration for transfer of house property at Chennai exceeds
` 50 lakhs, Mr. Anuj, being the transferee, is required to deduct tax @1% under
section 194-IA on ` 85 lakhs, being the amount of consideration for transfer of
property.
Mr. Anuj is required to deduct tax as source @1% under section 194-IA
from the amount of ` 54 lakhs, being the higher of the stamp duty value of
` 54 lakhs and consideration of ` 49,00,000 paid to Mr. Anant for transfer
of urban plot, since the stamp duty value exceeds ` 50 lakhs.
Mr. Anuj is not required to deduct tax at source under section 194-IA from
the consideration of `55 lakhs paid to Mr. Digvijay for transfer of rural
agricultural land, since the same is specifically excluded from the scope of
immovable property for the purpose of tax deduction under section 194-IA.
(ii) As per section 194LB, tax would be deductible @ 5% on gross interest
paid/credited by a notified infrastructure debt fund, eligible for exemption
under section 10(47), to a non-resident not being a company or to a foreign
company.
In the first case, since the payment is to a foreign company, health and
education cess @4% has to be added to the applicable rate of TDS.
Therefore, the tax deductible under section 194LB would be `31,200 (i.e.,
5.20% of `6 lakhs).

11
 However, in case the notified infrastructure debt fund pays interest to a
person who is a resident of a notified jurisdictional area, section 94A will
apply. Accordingly, tax would be deductible @30% (plus health and
education cess@4%) under section 94A, even though section 194LB
provides for deduction of tax at a concessional rate of 5%. Therefore, the
tax deductible in respect of payment of ` 2.5 lakh to Mr. Aman, who is a
resident of a notified jurisdictional area, would be ` 78,000, being 31.2%
of ` 2,50,000.
(iii) The landing and parking charges which are fixed by the Airports Authority
of India are not merely for the "use of the land". These charges are also for
services and facilities offered in connection with the aircraft operation at
the airport which include providing of air traffic services, ground safety
services, aeronautical communication facilities, installation and
maintenance of navigational aids and meteorological services at the airport
[Japan Airlines Co. Ltd. v. CIT / CIT v. Singapore Airlines Ltd. (2015) 377
ITR 372 (SC)]. Thus, tax is not deductible under section 194I which
provides deduction of tax for payment in the nature of rent.
Hence, tax is deductible @2% under section 194C by the airline company,
Vikasa Ltd., on payment of `18 lakhs made towards landing and parking
charges to the Airports Authority of India for the previous year 2024-25.
(iv) As per section 192, tax is deductible at source by any person who is
responsible for paying any income chargeable under the head ‘Salaries’.
However, as per sub-section (2A) of said section, the employee will be
entitled to relief u/s 89 and consequently, he will be required to furnish to
the person responsible for making the payment, such particulars in the
prescribed form (i.e., Form No.10E). The person responsible for making
the payment shall compute the relief and take into account the same while
deducting tax at source from salary.
(b) Rollback year means any previous year, falling within the period not exceeding
four previous years, preceding the first of the five consecutive previous years for
which advance pricing agreement is valid.
The application for advance pricing agreement may be filed at any time before the
first day of the previous year relevant to the first assessment year for which the
application is made, in respect of transactions which are of a continuing nature
from dealings that are already occurring; or before undertaking the transaction in
respect of remaining transactions.

12
 In the present case, since ASHA (P) Ltd. has made an application of APA and
also opted for rollback provisions, the APA is apparently in respect of international
transactions which are of continuing nature. Accordingly, the APA application filed
on 15 th February 2024 would be in respect of five previous years beginning with
P.Y. 2024-25 relevant to the A.Y. 2025-26.
Consequently, APA entered by ASHA (P) Ltd. can provide for determining ALP in
relation to international transactions entered during rollback years i.e., from A.Y.
2021-22 to A.Y. 2024-25 subject to satisfaction of certain conditions.
In the present case, since A.Y. 20219-20 and A.Y. 2020-21 fall beyond the said
four-year period, ASHA (P) Ltd. cannot avail roll back benefit in respect of these
years. From A.Y. 2021-22 to A.Y. 2024-25, the applicability of rollback provisions
would be as follows:
Rollback year Applicability of rollback provisions
A.Y. 2021-22 Yes, rollback provisions are applicable for A.Y.
2021-22.
A.Y. 2022-23 Yes, rollback provisions are applicable for A.Y.
2022-23 even if ALP adjustment was reduced to addition of
` 300 lakhs as against addition of ` 500 lakhs originally
determined by the TPO on account of APA, since such
reduction in the amount of ALP adjustment does not result
in reducing the total income or increasing the total loss, as
declared in the return of income of the said year by ASHA
(P) Ltd.
A.Y. 2023-24 Yes, roll back provisions are applicable for
A.Y. 2023-24, since ITAT has only set aside the order for
fresh consideration and the matter has not reached finality.
A.Y. 2024-25 No, rollback provisions are not applicable for
A.Y. 2024-25, since the return was filed belatedly
u/s 139(4) on 29.12.2024.

5. (a) (i) Under section 268A(1), the CBDT is empowered to issue orders, instructions
or directions to the other income-tax authorities, fixing such monetary limits, as
it may deem fit, to regulate filing of appeal or application for reference by any
income-tax authority.
Under section 268A(2), where an income-tax authority has not filed any
appeal or application for reference on any issue in the case of an assessee
for any assessment year, due to above-mentioned order/ instruction/
direction of the CBDT, such authority shall not be precluded from filing an

13
 appeal or application for reference on the same issue in the case of the
same assessee for any other assessment year or any other assessee for
the same or any other assessment year, if the tax effect exceeds the
specified monetary limits. Further, in such a case, it shall not be lawful for
an assessee to contend that the income-tax authority has acquiesced in
the decision on the disputed issue by not filing an appeal or application for
reference in any case.
In view of above provision, it would be in order for the Income-tax
Department to move an appeal to the Tribunal against the orders of the
CIT(A) in respect of A.Y. 2025-26 both for Shweta and Shefali, assuming
the tax effect of each of them exceeds the specified monetary limits.
(ii) Section 276CC provides for prosecution for wilful failure to furnish a return
of income within the prescribed time, in a case where tax would have been
evaded had the failure not been discovered. Since the amount of tax which
would have been evaded does not exceed ` 25 lakh, the imprisonment
would be for a term of 3 months to 2 years. In addition, fine would also be
attracted.
However, in a case where the return of income is not filed within the due
date, prosecution proceedings will not be attracted if the tax payable by a
person, other than a company, on the total income determined on regular
assessment, as reduced by the advance tax, if any, paid and any tax
deducted at source, does not exceed ` 10,000.
In this case, even though the tax liability of the firm as per the original order
of assessment exceeded ` 10,000, however, as a result of the order of the
Commissioner (Appeals), it got reduced to ` 9,100, which is less than
` 10,000. Therefore, since the tax liability of the firm on final assessment
was determined at ` 9,100 the prosecution proceedings are not
maintainable.
In Guru Nanak Enterprises v. ITO (2005) 279 ITR 30, where the facts were
similar, the Supreme Court held that prosecution was unwarranted.
(iii) Every assessee would be liable to tax@30% in respect of his undisclosed
foreign income and asset of the previous year. Undisclosed foreign asset
would be liable to tax in the previous year in which such asset comes to
the notice of the Assessing Officer.

14
 Section 2(2) of the Black Money (Undisclosed Foreign Income and Assets)
and Imposition of Tax Act, 2015 defines “assessee” to include a person
being -
(a) a resident in India within the meaning of section 6 of the Income-tax
Act, 1961 in the previous year; or
(b) a non-resident or not ordinarily resident in India within the meaning
of section 6(6) of the Income-tax Act, 1961 in the previous year but
who was resident in India either in the previous year to which the
income referred to in section 4 relates; or in the previous year in
which the undisclosed asset located outside India was acquired.
Mr. Rajiv is non-resident for the P.Y. 2024-25 (the previous year in which
notice is issued by the Assessing Officer), since he returned to the
Sigapore in April 2020 and visited every year only for 1 month. He was also
a non-resident for the P.Y. 2012-13, when he acquired shares of listed
companies in Singapore and P.Y. 2020-21, when he established a leather
goods manufacturing factory in Malaysia, since he was in India only during
the previous years from P.Y. 2013-14 to P.Y. 2019-20. However, he was
resident in India in the P.Y. 2015-16, when he acquired one apartment in
Canada.
Accordingly, the issue of notice on Mr. Rajiv under section 10 of the Black
Money Act, 2015, is tenable in law, in respect of apartment in Canda since
he was resident in the previous year 2015-16 when the property was
acquired.
However, notice issued in respect of shares of listed companies in
Singapore acquired in the P.Y.2012-13 and leather goods manufacturing
factory established in Malaysia in the P.Y.2020-21 is not tenable in law,
since Mr. Rajiv was non-resident in the previous years in which undisclosed
assets were acquired and also in the previous year in which it comes to the
notice of Assessing Officer.
(b) A hybrid mismatch is an arrangement that exploits a difference in the tax treatment
of an entity or an instrument under the laws of two or more tax jurisdictions to
achieve double non-taxation.
Branch mismatches arise where the ordinary rules for allocating income and
expenditure between the branch and head office result in a portion of the net
income of the taxpayer escaping the charge to taxation in both the branch and
residence jurisdiction. Unlike hybrid mismatches, which result from conflicts in the

15
 legal treatment of entities or instruments, branch mismatches are the result of
differences in the way the branch and head office account for a payment made by
or to the branch.
Hybrid mismatch arrangements arise due to -
(i) Creation of two deductions for a single borrowal
(ii) Generation of deductions without corresponding income inclusions
(iii) Misuse of foreign tax credit
(iv) Participation exemption regimes
Specific country laws that allow taxpayers to opt for the tax treatment of certain
domestic and foreign entities may aid hybrid mismatches.
BEPS Action Plan 2 gives recommendations to neutralise the effects of hybrid
mismatch arrangements, which include general changes to domestic law followed
by a set of dedicated anti-hybrid rules. Treaty changes are also recommended.
The 2017 report includes specific recommendations for improvements to domestic
law intended to reduce the frequency of branch mismatches as well as targeted
branch mismatch rules which adjust the tax consequences in either the residence
or branch jurisdiction in order to neutralise the hybrid mismatch without disturbing
any of the other tax, commercial or regulatory outcomes.
6. (a) The Assessing Officer can exercise his power of survey under section 133A only
after obtaining the approval of the Principal Director General or the Director
General or the Principal Chief Commissioner or the Chief Commissioner.
Assuming that he has obtained such approval in this case, he is empowered under
section 133A to enter any place of business of the assessee within his jurisdiction
only during the hours at which such place is open for the conduct of business .
In the case given, the “Silver” a popular Gym is open from 5.00 a.m. to 10.00 p.m.
for the conduct of business. The Assessing Officer entered the Gym at 9:30 pm in
the night which falls within the working hours of the Sports Complex.
Therefore, the claim made by the owner to the effect that the Assessing Officer
could not enter the Gym at night is not valid.
Further, as per section 133A(3)(ia), the Assessing Officer may, impound and
retain in his custody for such period as he thinks fit, any books of account or other
documents inspected by him after recording reasons for doing so. However, the
Assessing Officer cannot remove cash kept at the Gym. Moreover, he shall not
retain any books of account or other documents in his custody for a period

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 exceeding 15 days (excluding holidays) without obtaining the approval of the
Principal Chief Commissioner or Chief Commissioner or Principal Director
General or Director General or the Principal Commissioner or Commissioner or
Principal Director or Director, as the case may be.
(b) Tax Planning / Tax Management / Tax Evasion
Answer Reason
(I) Tax planning Depositing money in PPF and claiming deduction under
section 80C is as per the provisions of law. Hence, it is
a legitimate tax planning measure which enables her to
reduce her tax liability by claiming a deduction
permissible under the Income-tax Act, 1961.
(II) Tax evasion An air conditioner fitted at the residence of a director as
per the terms of his appointment would be a furniture
qualifying for depreciation@10%, whereas an air
conditioner fitted in a factory would be a plant qualifying
for a higher depreciation@15%. The wrong treatment
unjustifiably increases the amount of depreciation and
consequently, reduces profit and consequent tax
liability. Treatment of air-conditioner fitted at the
residence of a director as a plant fitted at the factory
would tantamount to furnishing of false particulars with
an attempt to evade tax.

(c) (i) Yes, the above income are subject to deduction of tax at source.
Income referred to in section 115BBA (i.e., Participation in hockey
tournaments in India and Contribution of an article relating to the sport of
hockey in a sports magazine in India) is subject to deduction of tax at
source@20% under section 194E.
Income referred to in section 115BB (i.e., winnings from lotteries) is subject
to deduction of tax at source@30% under section 194B.
Since Mr. Mr. Robert Jonson, is a non-resident, the amount of tax to be
deducted calculated at the prescribed rates mentioned above, would be
increased by health and education cess@4%.
(iii) Section 115BBA provides that if the total income of the non-resident
sportsman or non-resident entertainer comprises of only income referred
to in that section and tax deductible at source has been fully deducted, it
shall not be necessary for him to file his return of income.

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 In this case, although Mr. Robert Jonson is a non-resident sportsman, he
has winnings from lotteries as well. Therefore, he cannot avail the benefit
of exemption from filing of return of income as contained in section
115BBA. Hence, he has to file his return of income for A.Y.2025-26.
(d) Section 245Q(3) of the Income-tax Act, 1961 provides that an applicant, who has
sought for an advance ruling, may withdraw the application within 30 days from
the date of the application. Since more than 30 days have elapsed from the date
of application by Mr. Saiyyam to the Authority for Advance Rulings, he cannot
withdraw the application.
However, the Authority for Advance Rulings (AAR), in M.K. Jain AAR No.644 of
2004, has observed that though section 245Q(3) provides that an application may
be withdrawn by the applicant within 30 days from the date of the application, this,
however, does not preclude the AAR from permitting withdrawal of the application
after the said period with its permission, if the circumstances of the case so justify.

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