CU-MCOM-SEM-IV-Tax Planning and Procedure-Second Draft

["1. Explain the concept of divestiture in brief. 2. Explain the concept of financial lease in brief. 3. Explain the concept of foreign collaboration in brief. 4. Explain the concept of joint venture in brief. 5. Explain the concept of leasing in brief. 6. Explain the concept of operating lease in brief. 7. Explain the concept of outsourcing in brief. 8. Explain the concept of slump sale in brief. Long Questions 1. Discuss the decision factors and tax implications of outsourcing decision. 2. Discuss the decision factors and tax implications of close or continuedecision. 3. Discuss the decision factors and tax implications of export sales or domestic salesdecision. 4. Discuss the decision factors and tax implications of replace or repair decision. 5. Discuss the decision factors and tax implications of foreign collaborations and joint ventures. B. Multiple Choice Questions 1. Which of the following refers to an agreement between two or more companies from different countries to joint run any business operations? a. Cross-border merger b. International business combination c. Foreign collaboration d. Partnership 2. Which of the following means the transfer of one or more undertakings as a result of the sale for a single sum without values being assigned to the individual assets and liabilities? a. Divestiture b. Outright sale c. Slump sale d. Downright sale 3. Which of the following refers to having work performed for one company by an off- site, non-affiliated supplier? a. Outsourcing b. Insourcing c. Contracting 201 CU IDOL SELF LEARNING MATERIAL (SLM)","d. Joint venture 4. Which of the following is a lease that contains a provision that allows the lessee to cancel at any time or if the lessor is responsible for insurance and maintenance? a. Financial Lease b. Operating Lease c. Synthetic Lease d. Residual lease 5. Which of the following is a commercial enterprise undertaken jointly by two or more parties who otherwise retain their distinct identities? a. Merger b. Consolidation c. Absorption d. Joint venture 6. Which of the following leases are long term, carry no cancelation options, and the lessee is responsible for all insurance and maintenance? a. Financial lease b. Operating lease c. Synthetic lease d. Residual lease 7. Which of the following allows a company to buy a product (or service) from an outside supplier rather than making the product or perform the service in-house? a. Outsourcing b. Insourcing c. Contracting d. Joint venture Answer 202 1-c, 2-c, 3-a, 4-b, 5-d, 6-a, 7-a 13.11 REFERENCES Reference Books CU IDOL SELF LEARNING MATERIAL (SLM)","\uf0b7 Cruz, A., Deschamps, M., Niswander, F., Prendergast, D., & Schisler, D. (2018). Fundamentals of Taxation. New York: McGraw-Hill Education. \uf0b7 Martin, E. A. (2003). The Dictionary of Law. Oxford: Oxford University Press. \uf0b7 Singhania, V., & Singhania, K. (2021). Direct Taxes Law & Practice. New Delhi: Taxmann. Website \uf0b7 Income Tax Department. (2021, 4 1). Set Off and Carry Forward of Losses Under the Income Tax Act. Retrieved from Tutorials: https:\/\/www.incometaxindia.gov.in\/Tutorials\/21- %20MCQ%20set%20off%20and%20carry%20frwrd.pdf \uf0b7 Institute of Chartered Accountants of India. (2019, February 1). Set off and Carry forward, of Losses. Retrieved from Western India Regional Council: https:\/\/www.wirc-icai.org\/images\/material\/Key-Aspects-Carry-Forward-Set- Losses.pdf \uf0b7 Sirwalla, P. (2012, January 31). Income Tax Deductions That You Should Not Miss. Business Today. Retrieved from https:\/\/www.businesstoday.in\/magazine\/tax\/story\/income-tax-deductions-24273- 2011-12-28 \uf0b7 Directorate of Income Tax. (2021). Salary Income and Tax Implications for AY 2020-21. New Delhi. Retrieved from https:\/\/www.incometaxindia.gov.in\/booklets%20%20pamphlets\/salary-income- tax-implications-ay-20-21.pdf \uf0b7 KPMG. (2020, January 30). India: Income Tax. Retrieved from Taxation of International Executives: https:\/\/home.kpmg\/xx\/en\/home\/insights\/2011\/12\/india- income-tax.html 203 CU IDOL SELF LEARNING MATERIAL (SLM)","UNIT- 14DOUBLE TAXATION AVOIDANCE 204 AGREEMENT STRUCTURE 14.0 Learning Objectives 14.1 Introduction 14.1.1 Meaning of Double Taxation 14.1.2 Types of Double Taxation 14.1.3 Conflict of Residence and Source Rules 14.2 Characteristics of Double Taxation Avoidance Agreements 14.2.1 Nature of Double Taxation Avoidance Agreements 14.2.2 Purpose of Double Taxation Avoidance Agreements 14.2.3 Models of Double Taxation Avoidance Agreements 14.2.4 Interpretation of Tax Treaties 14.2.5 Indian Law and Tax Treaty 14.2.6 India-Mauritius Double Taxation Avoidance Agreements 14.3 General Principles of Double Taxation Avoidance Agreements 14.3.1 Non-discrimination 14.3.2 Dispute Resolution 14.3.3 Exchange of Information 14.4 Criticisms of Double Taxation Avoidance Agreements 14.4.1 Treaty Abuse 14.4.2 Base Erosion and Profit Shifting (BEPS) 14.5 Summary 14.6 Keywords 14.7 Learning Activity 14.8 Unit End Questions 14.9 References CU IDOL SELF LEARNING MATERIAL (SLM)","14.0 LEARNING OBJECTIVES After studying this unit, you will be able to: \uf0b7 Explain the entering tax treaties like double taxation avoidance agreement \uf0b7 Principle on which these treaties are based, and the different models \uf0b7 State the ways some taxpayers abuse the provisions of tax treaties and what governments doing to counter such abuse. 14.1 INTRODUCTION Overview of Double Taxation Avoidance Agreements The domestic law of most countries imposes taxation based on residence of the person deriving the income. The fundamentals of the tax system will apply irrespective of the fact that what is being taxed is foreign source income. So, the usual allocation, quantification, timing, and characterisation rules apply, as do the rules on deductibility of expenses and tax rates. For a taxpayer deriving cross-border income, the worst treatment by a residence country is that it imposes its taxation without any recognition of foreign tax paid on a source basis. In this case, there is full double taxation and, if the tax rates are high enough, it is possible for a taxpayer to be liable for more tax (on both a source and residence basis) than the income derived. 14.1.1 Meaning of Double Taxation Today, business is becoming increasingly international. In this situation there is a risk that a taxpayer may have to pay tax on the same transaction in more than one country. This is the essence of double taxation. Double taxation is a situation in which two or more taxes may need to be paid for the same asset, financial transaction and\/or income and arises due to overlap between different countries' tax laws and jurisdictions. The liability is often mitigated by \\\"tax treaties\\\" between countries. It is in the interest of all countries to ensure that undue tax burden is not cast on persons earning income by taxing them twice, once in the country of residence and again in the country where the income is derived. At the same time sufficient precautions are also needed to guard against tax evasion and to facilitate tax recoveries (Devani, 2017). 14.1.2 Types of Double Taxation Double taxation may be classified into broadly two categories: juridical double taxation and economic double taxation. 205 CU IDOL SELF LEARNING MATERIAL (SLM)","Juridical Double Taxation Juridical double taxation refers to circumstances where a taxpayer is subject to tax on the same income (or capital) in more than one jurisdiction. For example, a resident of India who is also considered to be a resident of the United States would be potentially subject to concurrent full taxation in both countries. Economic Double Taxation Economic double taxation refers to the taxation of two different taxpayers with respect to the same income (or capital). Economic double taxation occurs, for example, when income earned by a corporation is taxed both to the corporation and to its shareholders when distributed as a dividend. Tax treaties resolve juridical double taxation and not economic double taxation (Arnold, 2021). 14.1.3 Conflicts of Residence and Source Rules Each country provides for taxation of specified income based on the residence of the taxpayer or based on the source of income of the taxpayer (Patil, 2013). This creates three types of conflict: source\u2013source conflict, residence\u2013residence conflict, and residence\u2013source conflict. Source \u2013 Source Conflict The source\u2013source conflict arises when two or more countries claim the same income of a taxpayer as sourced in their own state. Residence \u2013 Residence Conflict The residence\u2013residence conflict arises when two or more countries claim that the same taxpayer as a tax resident of their own state. Residence \u2013 Source Conflicts The residence\u2013source conflicts arises when one state taxes the income under its source rules and the other state in which the taxpayer is a resident, taxes the same income under its residence rules. 14.2 CHARACTERISTICS OF DOUBLE TAXATION AVOIDANCE AGREEMENTS The domestic direct tax law of each country is self-centred, and hence they are difficult to integrate with direct tax laws of other countries.This is reason why countries began concluding tax treaties in order to better coordinate their laws, removing potential double taxation of cross-border dealings, and so freeing up international trade. These treaties were concluded on a bilateral basis in order to provide for specific integration between two tax systems. Over the years several model of tax treaties have developed. 206 CU IDOL SELF LEARNING MATERIAL (SLM)","14.2.1 Nature of Tax Double Taxation Avoidance Agreements There is wide divergence in double taxation avoidance agreements entered by different countries. However, we can discern a few common features of these tax treaties. These features are that they are bilateral in nature, their purpose is to provide relief from double taxation, there is a complex network of such treaties, and the treaties are not exhaustive in nature. Bilateral Agreement Tax treaties are essentially a bilateral agreement as to how two countries agree to divide taxation of cross-border dealings between them. These are ordinary treaties concluded in the ordinary way and take effect according to the laws of the two countries. The bilateral nature of treaties means that they do not work so well in situations involving three or more countries. Purpose of the Agreement The principal purpose of double taxation avoidance agreements has been to provide forrelief from double taxation as between the two states. Hence, they aretypically termed double tax treaties, double taxation conventions ordouble taxation agreements. Increasingly in recent years, there hasbeen additional focus on preventing tax evasion. Rigidity The bilateral tax treaty network is extremely rigid and limits the ability of countries to engage in domestic tax reform. Many countries have upwards of 100 treaties. If a country wishes to change its law in a way inconsistent with treaties, it is not possible to renegotiate all the treaties on a timely basis and it is commercially impossible to terminate them. Not Exhaustive Double taxation avoidance agreements simply do not deal with all tax issues that arise from international dealings. They deal only with those matters on which agreement can be reached and, in many cases, the language is left unclear in order to promote flexibility. Political Compromise The double taxation avoidance agreements are reactionary,customary and, at their worst, an historical accident. In their originthey were based on existing domestic tax laws and treaty practice and thatpractice still largely dictates the direction in which they develop.Oneof the biggest mistakes made by students of international tax is to believethat tax treaties are planned and have some sort of conceptual structurebased on principle. This is simply not the case. Tax treaties and modeltreaties are built on political compromise. 14.2.2 Purpose of DTAAs 207 CU IDOL SELF LEARNING MATERIAL (SLM)","We saw above that the purpose of double taxation avoidance agreements has been to provide for relief from double taxation as between the two states as well as to prevent tax evasion.As per Section 90 of the Income Tax Act, 1961, the Government of India can enter into a double tax avoidance agreement (DTAA) with the government of any country outside India for the following purposes: \uf0b7 Granting of relief in respect of income on which have been paid both income- tax under Indian law and income-tax in the country with whom the agreement is entered. \uf0b7 Avoidance of double taxation of income under the Income Tax Act, 1961, and under the corresponding law in force in in the country with whom the agreement is entered. \uf0b7 Exchange of information for the prevention of evasion or avoidance of income-tax chargeable under the Income Tax Act, 1961, or under the corresponding law in force in in the country with whom the agreement is entered, or investigation of cases of such evasion or avoidance \uf0b7 Recovery of income-tax under the Income Tax Act, 1961 and under the corresponding law in force in in the country with whom the agreement is entered. Thus, the primary objective of double taxation avoidance agreements is to (a) eliminate double taxation; (b) eliminate discrimination against non-resident taxpayers; (c) exchange of information between two countries to counter tax evasion; and (d) provide a mechanism. 14.2.3 Models of Double Taxation Avoidance Agreements The first bilateral double taxation avoidance agreements dealing with direct taxation was that between Prussia and Austria\u2013Hungary in 1899, although it was apparently based on the German Imperial Double Taxation Law of 1870, which sought to relieve double taxation between German states. Later, the League of Nations sought to facilitate signing of such treaties by issuing a number of model treaties. As of now there are several models of double taxation avoidance agreements, two of the prominent ones are the OECD Model and the United Nations (UN) Model. OECD Model In the mid-1950s, in the context of closer economic integration within Europe, the Organisation for European Economic Co-operation (OEEC) took upon itself the task of producing a model double taxation avoidance agreement for use between its members. The OEEC became the OECD in 1961 and issued a first model double taxation avoidance agreement in 1963. 208 CU IDOL SELF LEARNING MATERIAL (SLM)","The OECD Model represents the position of developed countries. Tax treaties based on the OECD Model are agreements between countries as to how they allocate tax rights on cross- border transactions between them. The following are the key points of the OECD Model: \uf0b7 Lays emphasis on the right of State of residence to tax. \uf0b7 Royalty taxation in the Residence State. \uf0b7 Excludes taxation on services. United Nations (UN) Model The OECD Model represents the position of developed countries. By the late 1970s it was felt that something should be done to facilitate the conclusion of tax treaties between developing countries and between developed and developing countries. The result was the 1980 UN Model, which largely followed the OECD Model, with some important exceptions. The model is designed to encourage flow of investments from the developed to developing countries, or amongst developing countries. United Nations Model is a compromise between source principle and residence principle. The model gives more weightage to source principle, that is, income should be taxed where it arises. Until 1980, there was no United Nations Model Double Taxation Convention between Developed and Developing Countries (UN Model). Indian treaties for periods before this time are closer to the OECD Model. Subsequent treaties have been strongly influenced by the UN Model, with greater emphasis on source taxation. 14.2.4 Interpretation of Tax Treaties Like the interpretation of domestic law, interpretation of a tax treatyis a matter for the domestic courts of the country in which the issue israised. However, the rules of interpretation are broader than the rulesfor domestic law because, while the treaty provisions have been incorporatedinto domestic law, so as to take effect, what is being interpreted isa treaty and not domestic law. The provisions of the Vienna Convention on the Law of Treaties are relevant when interpreting a tax treaty (Kaka, 2021). The following are internationally accepted methods of treaty interpretation: \uf0b7 Text of the treaty. \uf0b7 Negotiating history \u2013 traveaux preparatoires. \uf0b7 Domestic ratification documents. \uf0b7 Subsequent practices \/ judicial precedents. \uf0b7 Vienna Convention on the Law of Treaties. 14.2.5 Indian Law and Tax Treaty 209 CU IDOL SELF LEARNING MATERIAL (SLM)","Central government has power to enter tax treaty with government of another country under the delegated legislation granted by the parliament. The following are important points of the treaty: \uf0b7 If no tax liability is imposed under the Income-tax Act, there would be no need to claim a tax treaty benefit. \uf0b7 If a tax liability is imposed under the Income-tax Act, the tax treaty may be applied to reduce tax liability. \uf0b7 The law allows a non-resident taxpayer to choose between provisions of Income-tax Act and tax treaty, whichever is beneficial. The tax treaty does not have to be laid before the parliament since no legislation is required to give effect to a treaty, however, a formal approval of the tax treaty by notification or such other means is required. 14.2.6 India-Mauritius DTAA The tax treaty between India and Mauritius was signed in 1982 in keeping with India\u2019s strategic interests in the Indian Ocean and India\u2019s close cultural links with Mauritius. The treaty provides for a capital gains tax exemption to a Mauritius resident on transfer of Indian securities. As India opened the doors of its economy to foreign investment in 1991, Mauritius became a favourite jurisdiction for channeling investments into India. The Indian tax officers saw this as a means of tax evasion by abusing the provisions of the tax treaty. They started making claims stating that the so-called Mauritian entities were merely letter box companies.Sensing the adverse impact on international relations, the GOI had to issue a circular to restrain Indian tax officers. Mauritius ranks first in terms of FDI investment into India, with 33 per cent of the total FDI coming from Mauritius; on portfolio investment, Mauritius ranks second after the US. 14.3 GENERAL PRINCIPLES OF DOUBLE TAXATION AVOIDANCE AGREEMENTS Double taxation avoidance agreements or tax treaties are agreements between sovereign states governed by the broad legal framework of the Vienna Convention on the law of treaties. The three guiding principles of double tax avoidance agreement are: non- discrimination, amicable resolution of disputes and exchange of information (Nakayama, 2011). 14.3.1 Non-discrimination Agreements also contain clauses for non-discrimination of the national of a contracting State in the other State vis-a-vis the nationals of that other State. The fact that higher rates of tax 210 CU IDOL SELF LEARNING MATERIAL (SLM)","are prescribed for foreign companies in India does not amount to discrimination against the permanent establishment of the non-resident company. This has been made explicit in certain agreements such as one with U.K. 14.3.2 Dispute Resolution Provisions also exist for mutual agreement procedure which authorises the competent authorities of the two States to resolve any dispute that may arise in the matter of taxation without going through the normal process of appeals etc. provided under the domestic law. 14.3.3 Exchange of Information Another important feature of some agreements is the existence of a clause providing for exchange of information between the two contracting States which may be necessary for carrying out the provisions of the agreement or for effective implementations of domestic laws concerning taxes covered by the tax treaty. Information about residents getting payments in other contracting States necessary to be known for proper assessment of total income of such individual is thus facilitated by such agreements. 14.4 CRITICISMS OF DOUBLE TAXATION AVOIDANCE AGREEMENTS There have been several criticisms of double taxation avoidance agreements (Hearson, 2018). The double taxation avoidance agreements have been entered for the benefit of taxpayers. 14.4.1 Treaty Abuse The double taxation avoidance agreement is designed to ensure that the taxpayer is not burdened with excessive taxation merely because he in engaged in a cross-border transaction. However, we have seen cases where taxpayers have resorted to aggressive tax planning and abused the provisions of the tax treaties. Three of the common colourable devices uses by some taxpayers are double dipping, round tripping, and commissionaire Arrangements. Double Dipping Double dipping refers to the potential of a taxpayer simultaneously claiming deduction in two countries for the same expense. Round-Tripping One of the criticisms of tax treaty between India and Mauritius is that Indian taxpayers avoid paying taxes by resorting to round-tripping funds. Round tripping refers to money that leaves the country though various channels and makes its way back into the country often as foreign investment.Round-tripping involves transferring funds to Mauritius using informal channels and investing this same money in India as FDI. This is done to claim exemption of capital tax as the treaty provides for a capital gains tax exemption to a Mauritius resident on transfer of 211 CU IDOL SELF LEARNING MATERIAL (SLM)","Indian securities.Round tripping has become a major cause for tax evasion and has caught the attention of tax authorities across the world. Round trip financing is deemed as an arrangement that lacks commercial substance and as such falls under the domain of tax evasion.Round trip financing is defined to include any arrangement in which, through a series of transactions funds are transferred among the parties to the arrangement; and such transactions do not have any substantial commercial purpose other than obtaining the tax benefit without having any regard to the following: \uf0b7 Whether or not the funds involved in the round-trip financing can be traced to any funds transferred to, or received by, any party in connection with the arrangement; \uf0b7 The time, or sequence, in which the funds involved in the round -rip financing are transferred or received; or \uf0b7 The means by, or manner in, or mode through, which funds involved in the round-trip financing are transferred or received. Commissionaire Arrangements One of ways of unjustified tax avoidance under the tax treaty is the commissionaire arrangement.A commissionaire structure usually replaces traditional buy\/sell operations. Instead of several principals, the commissionaire structure requires only one principal. Under a commissionaire arrangement, the Indian sales companies (commissionaires) act on a commission basis, they sell goods in their own name but on behalf and at the risk of one central company (principal). Thus, the commissionaires reduce their activities to their core business, namely sales. The commissionaire model involves an Indian entity securing orders in India for a foreign entity such that the ultimate contract of sale is concluded outside India between the foreign entity and the Indian customer. In such cases, under the existing regulations, the Indian entity pays tax on a small margin attributable to the sales function, commonly on a cos- plus margin basis, even though virtually all efforts for securing the contract were carried out in India. The BEPS Protocol now provides that where the Indian entity plays a principal role in securing the contract, it can be considered as a permanent establishment foreign entity in India. 14.4.2 Base Erosion and Profit Shifting (BEPS) Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to \\\"shift\\\" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus \\\"eroding\\\" the \\\"tax-base\\\" of the higher-tax jurisdictions.The Organisation for Economic Co- operation and Development (OECD) define BEPS strategies as \\\"exploiting gaps and mismatches in tax rules\\\". 212 CU IDOL SELF LEARNING MATERIAL (SLM)","Some countries, called tax havens, offer BEPS tools to \\\"shift\\\" profits to the haven, and additional BEPS tools to avoid paying taxes within the haven.In January 2017, the OECD estimated that BEPS tools are responsible for tax losses of approximately US 100\u2013240 billion per annum. The effect of BEPS tools is most felt in developing economies, which are denied the tax revenues needed to build infrastructure. The underlying principle of the BEPS Project is that tax should be paid in the country in which the economic substance and value-addition functions of a transaction are carried out and the tax treaty benefits should not be given to dummy\/shell entities set up primarily to take unfair advantage of tax treaties and mismatch in tax rules. Since the BEPS Project aims to link tax with value creation, developing countries stand to gain from it. India has been one of the front-runners in the BEPS initiative. It is said that the Indian tax authorities' position on certain tax matters, for which they were criticized in the past (for being narrow-minded and revenue-focused), now find place under the BEPS Action Plans. India has already amended its tax treaties with Mauritius, Cyprus, and Singapore to deal with the artificial avoidance of tax liabilities in India. 14.5 SUMMARY \uf0b7 The domestic law of most countries imposes taxation based on residence of the person deriving the income. The fundamentals of the tax system will apply irrespective of the fact that what is being taxed is foreign source income. So, the usual allocation, quantification, timing, and characterisation rules apply, as do the rules on deductibility of expenses and tax rates. \uf0b7 Double taxation is a situation in which two or more taxes may need to be paid for the same asset, financial transaction and\/or income and arises due to overlap between different countries' tax laws and jurisdictions. The liability is often mitigated by \\\"tax treaties\\\" between countries. \uf0b7 Double taxation may be classified into broadly two categories: juridical double taxation and economic double taxation. Each country provides for taxation of specified income based on the residence of the taxpayer or based on the source of income of the taxpayer. This creates three types of conflict: source\u2013source conflict, residence\u2013residence conflict, and residence\u2013source conflict. \uf0b7 Over the years several model of tax treaties have developed. There is wide divergence in double taxation avoidance agreements entered by different countries. However, we can discern a few common features of these tax treaties. These features are that they are bilateral in nature, their purpose is to provide relief from double taxation, there is a complex network of such treaties, and the treaties are not exhaustive in nature. 213 CU IDOL SELF LEARNING MATERIAL (SLM)","\uf0b7 The first bilateral double taxation avoidance agreements dealing with direct taxation was that between Prussia and Austria\u2013Hungary in 1899, although it was apparently based on the German Imperial Double Taxation Law of 1870, which sought to relieve double taxation between German states. Later, the League of Nations sought to facilitate signing of such treaties by issuing a number of model treaties. As of now there are several models of double taxation avoidance agreements, two of the prominent ones are the OECD Model and the United Nations (UN) Model. \uf0b7 The rules of interpretation are broader than the rules for domestic law because, while the treaty provisions have been incorporated into domestic law, so as to take effect, what is being interpreted is a treaty and not domestic law. The provisions of the Vienna Convention on the Law of Treaties are relevant when interpreting a tax treaty. \uf0b7 The three guiding principles of double tax avoidance agreement are: non- discrimination, amicable resolution of disputes and exchange of information. We have seen cases where taxpayers have resorted to aggressive tax planning and abused the provisions of the tax treaties. Three of the common colourable devices uses by some taxpayers are double dipping, round tripping. 14.6KEYWORDS \uf0b7 BEPS. Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to \\\"shift\\\" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus \\\"eroding\\\" the \\\"tax-base\\\" of the higher-tax jurisdictions. \uf0b7 Double Dipping. Double dipping refers to the potential of a taxpayer simultaneously claiming deduction in two countries for the same expense. \uf0b7 DTAA. A Double Taxation Avoidance Agreement (DTAA) is a bilateral tax treaty signed with the goal of relieving taxpayers from the burden of paying double taxes on the same transaction. \uf0b7 Economic Double Taxation. Economic double taxation refers to the taxation of two different taxpayers with respect to the same income (or capital). Economic double taxation occurs, for example, when income earned by a corporation is taxed both to the corporation and to its shareholders when distributed as a dividend. \uf0b7 Juridical Double Taxation.Juridical double taxation refers to circumstances where a taxpayer is subject to tax on the same income (or capital) in more than one jurisdiction. \uf0b7 Round Tripping. Round tripping refers to money that leaves the country though various channels and makes its way back into the country often as foreign investment. \uf0b7 Tax Treaty. A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of their respective citizens. 214 CU IDOL SELF LEARNING MATERIAL (SLM)","14.7 LEARNING ACTIVITY Visit the website of a business newspaper, like Business Standard https:\/\/www.business- standard.com\/ and refer to news on double taxation avoidance agreements for the last ten days and write an essay on the following: (1) During the ten-day period, how many articles pertained to double taxation avoidance agreements; (2) Out of the articles that pertained to double taxation avoidance agreements, how many of them referred to the India-Mauritius tax treaty; and (3) How many articles were critical of the double taxation avoidance agreements and how many were either positive or neutral? ___________________________________________________________________________ ___________________________________________________________________________ 14.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain the concept of base erosion and profit shifting (BEPS) in brief. 2. Explain the concept of double dipping in brief. 3. Explain the concept of economic double taxation in brief. 4. Explain the concept of juridical double taxation in brief. 5. Explain the concept of round tripping in brief. 6. Explain the concept of tax treaty in brief. Long Questions 1. What do you understand by the term double taxation avoidance agreements? Explain the different types of double taxation avoidance agreements. 2. In the context of double taxation avoidance agreementsexplain the various conflicts of residence and source rules? 3. Discuss the nature of double taxation avoidance agreements. 4. Discuss the purpose of double taxation avoidance agreements. 5. Discuss the general principles of double taxation avoidance agreements. 6. What are various ways the provisions of double taxation avoidance agreementsabused? 7. Explain the concept of Base Erosion and Profit Shifting (BEPS). B. Multiple Choice Questions 215 CU IDOL SELF LEARNING MATERIAL (SLM)","1. Which of the following refers to the taxation of two different taxpayers with respect to the same income (or capital)? a. Nominal double taxation b. Juridical double taxation c. Synthetic double taxation d. Economic double taxation 2. Which of the following refers to circumstances where a taxpayer is subject to tax on the same income (or capital) in more than one jurisdiction? a. Nominal double taxation b. Juridical double taxation c. Synthetic double taxation d. Economic double taxation 3. Which of the following refers to money that leaves the country though various channels and makes its way back into the country often as foreign investment? a. Round tripping b. Offshoring c. Double dipping d. Reshoring 4. Which of the following refers to the potential of a taxpayer simultaneously claiming deduction in two countries for the same expense? a. Round tripping b. Offshoring c. Double dipping d. Reshoring 5. Which of the following refers to corporate tax planning strategies used by multinationals to \\\"shift\\\" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus \\\"eroding\\\" the \\\"tax-base\\\" of the higher-tax jurisdictions? a. Base erosion and profit shifting (BEPS) b. Tax planning c. Tax avoidance 216 CU IDOL SELF LEARNING MATERIAL (SLM)","d. Tax mitigation Answer 1-d, 2-b, 3-a, 4-c, 5-a 14.9 REFERENCES Reference Books \uf0b7 Cruz, A., Deschamps, M., Niswander, F., Prendergast, D., & Schisler, D. (2018). Fundamentals of Taxation. New York: McGraw-Hill Education. \uf0b7 Martin, E. A. (2003). The Dictionary of Law. Oxford: Oxford University Press. \uf0b7 Singhania, V., & Singhania, K. (2021). Direct Taxes Law & Practice. New Delhi: Taxmann. Website \uf0b7 Income Tax Department. (2021, 4 1). Set Off and Carry Forward of Losses Under the Income Tax Act. Retrieved from Tutorials: https:\/\/www.incometaxindia.gov.in\/Tutorials\/21- %20MCQ%20set%20off%20and%20carry%20frwrd.pdf \uf0b7 Institute of Chartered Accountants of India. (2019, February 1). Set off and Carry forward, of Losses. Retrieved from Western India Regional Council: https:\/\/www.wirc-icai.org\/images\/material\/Key-Aspects-Carry-Forward-Set- Losses.pdf \uf0b7 Sirwalla, P. (2012, January 31). Income Tax Deductions That You Should Not Miss. Business Today. Retrieved from https:\/\/www.businesstoday.in\/magazine\/tax\/story\/income-tax-deductions-24273- 2011-12-28 \uf0b7 Directorate of Income Tax. (2021). Salary Income and Tax Implications for AY 2020-21. New Delhi. Retrieved from https:\/\/www.incometaxindia.gov.in\/booklets%20%20pamphlets\/salary-income- tax-implications-ay-20-21.pdf \uf0b7 KPMG. (2020, January 30). India: Income Tax. Retrieved from Taxation of International Executives: https:\/\/home.kpmg\/xx\/en\/home\/insights\/2011\/12\/india- income-tax.html \uf0b7 Arnold, B. J. (2021, April 1). An Introduction to tax Treaties. Retrieved from https:\/\/www.un.org\/esa\/ffd\/wp- content\/uploads\/2015\/10\/TT_Introduction_Eng.pdf 217 CU IDOL SELF LEARNING MATERIAL (SLM)"]