CA Final – Mock Test Series

PAPER 4: Direct Tax Laws and International Taxation (By CA Akshansh Garg)
Section-A: MCQs [2 marks each; 15 MCQs]
1. Scott Technologies Inc., incorporated in Virginia, USA provides
services to Sehgal Peripherals Limited in relation to setting up a
manufacturing facility in Meerut of various electronic goods and
peripherals under a scheme notified by the Central Government. The
consideration charged for this service is Rs 50,00,00,000 by Scott
Technologies Inc. What is the taxable income and tax liability of Scott
Technologies Inc for AY 2026-27?
a. Rs 5,00,00,000 ; Rs 1,85,64,000
b. Rs 10,00,00,000 ; Rs 3,71,28,000
c. Rs 12,50,00,000 ; Rs 4,77,75,000
d. Rs 12,50,00,000 ; Rs 5,46,00,000

2. AKG Ltd. has Amalgamated with Keyur Ltd. on 15/4/25. Keyur Ltd.
had incurred Normal Business Losses of Rs 2,00,00,000 in AY 23-24
which are being carried forward since then. Till which AY can AKG Ltd.
carry forward and set-off the Business Losses incurred by Keyur Ltd?
a. AY 2031-32
b. AY 2035-36
c. Allowed to be carried forward infinitely
d. Losses will lapse

3. Mr Harish has availed an Education Loan of Rs 20,00,000 from

Muthoot Finance Ltd. to facilitate higher education of his son Dhyey
in University College, London. Under the LRS Scheme of RBI, Harish
has remitted Rs 7,50,000 to Dhyey through an AD Bank. What
amount shall be collected by the AD Bank as tax from Mr Harish?
a. NIL
b. 37,500
c. 3,750
d. 45,000

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 CASE STUDY-1
SFT Flair Trust is a business trust registered under SEBI (Real Estate
Investment Trusts) Regulations, 2014. Details of its income for the previous
year ended 31st March, 2026 are as follows:
I. Rental income of Rs 5 crores from directly owned real estate assets.
II. Long term capital gain of Rs 1.5 crore on sale of listed shares of XYZ Ltd.,
an Indian company in which SFT Flair trust holds controlling interest
through holding 60% of the shareholding of XYZ Ltd. Transfer took place on
15.4.2025. STT paid both at the time of purchase and sale.
III. Short term capital gain of Rs 1 crore on sale of development properties.
IV. Dividend of Rs 4.5 crore from XYZ Ltd.
SFT Flair Trust has distributed Rs 16 crores to its resident and non-resident
unit holders in the previous year 2025-26. From the given information,
answer the MCQs 4-9:
4. In case of distribution of rental income component to its resident and
non-resident unit holders, SFT Flair Trust is liable to deduct tax at
source at the rate of:
a. 10% under section 194-I and rates in force under section 195,
respectively
b. 10% and rates in force, respectively under section 194LBA
c. 30% and 10%, respectively under section 194LBA
d. 5% and 10%, respectively under section 194LBA

5. Which of the following statements is correct regarding taxability in

the hands of SFT Flair Trust for Long-term capital gain of Rs 1.5 crore
on sale of listed shares of XYZ Ltd. and short-term capital gain of Rs 1
crore on sale of development properties.
a. Long-term capital gain on sale of listed shares is taxable @
12.5% and short-term capital gain on sale of development
properties is taxable at maximum marginal rate

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 b. Long-term capital gain on sale of listed shares is taxable at
maximum marginal rate and short-term capital gain on sale of
development properties is taxable @15%
c. Both the capital gains are taxable at maximum marginal rate
d. LTCG is taxable @ 20% and STCG is taxable at 15%

6. Which of the following statements is correct regarding taxability in

the hands of SFT Flair Trust and its unit holders in respect of Rental
income of Rs 5 crores from directly owned real estate assets:
a. Exempt in the hands of SFT Flair Trust and unit holders both u/s
10(23FCA).
b. Taxable in the hands of SFT Flair Trust and unit holders u/s
115UA(3).
c. Exempt in the hands of SFT Flair Trust u/s 10(23FCA) and
taxable in the hands of unit holders u/s 115UA(3).
d. Exempt in the hands of SFT Flair Trust u/s 10(23FCA) and
taxable in the hands of unit holders u/s 115UA(3).

7. Which of the following statements is correct regarding taxability in

the hands of SFT Flair Trust and its unit holders in respect of dividend
income if XYZ Ltd. has not opted to pay tax as per section 115BAA?
a. Exempt in the hands of SFT Flair Trust and unit holders both
b. Taxable in the hands of SFT Flair Trust but exempt in the hands
of its unit holders
c. Taxable in the hands of SFT Flair Trust but exempt in the hands
of its unit holders
d. Taxable in the hands of SFT Flair Trust and unit holders

8. What is the date by which SFT Flair Trust shall intimate the Unit
Holders and Income Tax Authorities about Nature and Proportion of
Income distributed by it for AY 2026-27?
a. 15th June 2026
b. 30th November 2026
c. 15th June 2026 and 30th June 2026, respectively.
d. 30th June 2026 and 15th June 2026, respectively.

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 9. Assume that SFT Flair has distributed a total of 1,000 units, of which
a 100 units are held by Dev Amin. Dev Amin had purchased these
units at the rate of Rs 30,000 per unit. What is the specified sum
taxable u/s 56(2)(xii) in the hands of Dev Amin for AY 2026-27,
assuming that no sum was taxable in any preceding PYs?
a. NIL
b. 1,30,00,000
c. 1,60,00,000
d. 10,00,000
CASE-STUDY 2
Mr. Rohan Mehta is a property dealer and also engaged in the business of
constructing apartments. A search under section 132 in the business
premise of Mr. Rohan was conducted on 10th December 2025. The last of
the authorisations was executed on 18th December 2025. The following
facts were discovered during the search proceedings –
-Cryptocurrency of Rs 50 lakhs acquired in the F.Y. 2022-23 and
-Jewellery worth Rs 30 lakhs acquired in the F.Y. 2024-25.
Out of this, Rohan could explain source of only Rs 20 lakhs invested in
crypto currency and jewellery worth Rs 10 lakhs purchased via NEFT
payment.
Further, books of account revealed an unexplained expenditure of Rs 15
lakhs incurred during the F.Y. 2023-24 towards foreign travel of family
members. No proper source was explained. Loose papers indicated receipt
of Rs 40 lakhs in cash for sale of flats during the F.Y. 2021-22. This amount
was not recorded in the books of account.
It has come to the notice of the Assessing Officer that the assessment for
A.Y. 2024-25 was pending under section 143(3) on the date of initiation of
the search. The Assessing Officer issued a notice under section 158BC for
furnishing a return within 60 days. However, Mr. Rohan Mehta furnished the
return after the expiry of 60 days. The Assessing Officer, after considering
evidence, determined total income of Rs 1.05 crore and proceeded to levy

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 tax at the rate applicable along with surcharge and cess. He also levied
interest @2% of tax on undisclosed income for every month or part of the
month for the period after the expiry of 60 days and ending on the date of
completion of assessment under section 158BC.
On 12.3.2026, Mr. Jeevan and Mr. Shivam purchased an apartment from Mr.
Rohan Mehta for Rs 70 lakhs (Rs 35 lakhs each). The stamp duty value of
the apartment is Rs 48 lakhs. The consideration amount includes Rs 2
lakhs towards car parking and Rs 50,000 towards maintenance fees.
On 20.3.2026, ABC Pvt. Ltd. bought back 50,000 shares including 500
shares from Mr. Jeevan for Rs 1250 per share. Mr. Jeevan acquired these
shares for Rs 200 per share in the year 2018. From the information given
above, answer the MCQs 10-15:
10. Whether any tax is required to be deducted on purchase of
apartment by Mr. Jeevan and Mr. Shivam?
a. No, tax is not deductible as the consideration payable by each
of them is less than Rs 50 lakhs.
b. Yes, tax is deductible @1% on consideration payable
(excluding car parking and maintenance fees) by Mr. Jeevan
and Mr. Shivam.
c. No, tax is not deductible as the stamp duty value of the
apartment is less than Rs 50 lakhs.
d. Yes, tax is deductible @1% on consideration payable (including
carparking and maintenance fees) by Mr. Jeevan and Mr.
Shivam

11. What will be considered as the “block period” for the purpose
of section 158B in this case?
a. A.Y. 2020-21 to 2025-26 and from 01.04.2025 to 10.12.2025
b. A.Y. 2019-20 to 2024-25 and from 01.04.2025 to 18.12.2025
c. A.Y. 2020-21 to 2025-26 and from 01.04.2025 to 18.12.2025
d. A.Y. 2019-20 to 2024-25 and from 01.04.2025 to 10.12.2025

12. With respect to block assessment, Mr. Rohan Mehta received

the following different opinions: I. Pending assessment for A.Y. 2024-

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 25 under section 143(3) on the date of initiation of search shall abate.
| II. Pending assessment for A.Y. 2024-25 under section 143(3) on the
date on initiation of search shall continue and be completed under
the said section only. | III. The total income of Rs 1.05 crore shall be
taxable at normal slab rates of A.Y. 2026-27. | IV. The total income of
Rs 1.05 crore shall be taxable @ 60% plus surcharge and cess. | V.
Penalty under section 270A shall be applicable in respect of
undisclosed income. Which of these sets are correct?
a. (i), (iii) & (v)
b. (ii), (iii) & (v)
c. (i) & (iv)
d. (i), (iv) & (v)

13. Whether the interest levied by the Assessing Officer in respect

of undisclosed income assessed for the block period is correct?
a. Yes, interest @2% of tax on undisclosed income can be levied
for every month or part of the month for the period after the
expiry of 60 days and ending on the date of completion of
assessment under section 158BC
b. No, interest @1.5% of tax on undisclosed income can be levied
for every month or part of the month for the period after the
expiry of 60 days and ending on the date of completion of
assessment under section 158BC.
c. No, interest @1% of tax on undisclosed income can be levied
for every month or part of the month for the period after the
expiry of 60 days and ending on the date of completion of
assessment under section 158BC.
d. No, interest @1.5% of tax on undisclosed income can be levied
for every month or part of the month for the period after the
expiry of 60 days and ending on the date of furnishing the return
of income for the block period.

14. What are the tax implications of buy back of shares in the
hands of Mr. Jeevan?

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 a. Long-term capital gain of `5,25,000 would be taxable in the
hands of Mr. Jeevan
b. Long-term capital loss of ` 1,00,000 and deemed dividend of `
6,25,000 would arise in the hands of Mr. Jeevan
c. ABC Pvt. Ltd. is liable to pay additional income-tax on buy back
of shares. Consequently, income arising on buy back of shares
would be exempt in the hands of Mr. Jeevan
d. Long-term capital gain of ` 4,00,000 as well as deemed
dividend of ` 6,25,000 would be taxable in the hands of Mr.
Jeevan.

15. What are the tax implications of buy back of shares in the
hands of Mr. Jeevan if the buyback has been carried out ABC Inc., a
foreign company?
a. ABC Inc. is liable to pay additional income-tax on buy back of
shares. Consequently, income arising on buy back of shares
would be exempt in the hands of Mr. Jeevan.
b. Long-term capital loss of Rs 1,00,000 and deemed dividend of
Rs 6,25,000 would arise in the hands of Mr. Jeevan
c. Long-term capital gain of Rs 4,00,000 as well as deemed
dividend of Rs 6,25,000 would be taxable in the hands of Mr.
Jeevan.
d. Long-term capital gain of Rs 5,25,000 would be taxable in the
hands of Mr. Jeevan.

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 Section-B: Descriptive Questions
[14 marks each; Question 1 is compulsory and out of Question 2 to
Question 6, any 4 need to be attempted.]
1. M/s NovaMotion Vehicles Ltd. is engaged in assembling and
manufacturing of automobiles and auto components in Nagpur,
Maharashtra. The net profit after debit/credit of the following
amounts to its Statement of Profit and Loss for the year ended 31-03-
2026 was Rs 8,25,00,000.
a. Depreciation as per the Companies Act, 2013, amounting to Rs
1,80,00,000.
b. Contributed a sum of Rs 10,70,000 during the financial year
2025-26 to National Reform Party, a registered political party,
by way of an account payee cheque.
c. Loss of Rs 2 lakh from hedging contracts entered into for
mitigating the loss arising due to fluctuation in foreign currency
payment towards an imported machinery purchased from
Japan for Rs 65 lakhs, which was installed in the month of
December 2025.
d. The company borrowed funds from two state financial
institutions Rs 75.75 lakhs from Andhra Pradesh Industrial
Development Corporation Limited (APIDC) and Rs 39.94 lakhs
from Andhra Pradesh State Financial Corporation (APSFC). The
company had accrued interest of Rs 11,56,900 on these loans
but did not make payments. However, while restructuring the
loan facility, the company converted the interest due into
equity shares allotted to the respective financial institutions on
05th March 2026.
e. The company had borrowed a sum of Rs 6,74,00,000 from the
HDFC Bank on 01.06.2025 for the purpose of acquiring
machinery of the same amount. Interest on such loan is
payable at 10% per annum. The interest pertaining to the
period ending on 31.03.2026 remained outstanding as on that
date and was subsequently paid on 1.12.2026.

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 f. On 11th November 2025, the company made a payment of Rs
63,00,000 to a scientific research lab instituted by the son of
the promoter, which has not yet obtained any approval.
g. The company had opened a new unit in Halol, Gujarat on 3rd
December 2025 for which it incurred Rs 1,85,00,000 as
Preliminary Expenses. For the expansion, the following details
were given:
i. Investment in Plant & Machinery of Rs 10,00,00,000.
ii. The above investment was financed by issuing 10,00,000
equity shares of Face Value of Rs 50 and issuance of
Debentures worth of Rs 1,00,00,000 and rest was
bootstrapped from the retained earnings of the company.
h. The company sold auto components worth Rs 18,50,000 to M/s
Zenith Tech Solutions, a sole proprietorship, on 15.12.2022. On
20.01.2025, Rs 11,00,000 was written off in the books as a bad
debt. The sole proprietor passed away on 05.02.2026, and the
company later recovered Rs 9,80,000 in full and final
settlement on 28.02.2026. The entire recovered amount was
recorded as bad debts recovered and credited to the
Statement of Profit and Loss.
i. Long-term capital gains of Rs 6,18,000 on sale of listed equity
shares on 19th September 2025, on which Securities
Transaction Tax (STT) was paid at the time of sale but not at the
time of acquisition since it was acquired in 2016 when the
company was delisted from BSE and NSE.
Additional Information:
• Depreciation calculated as per the Income-tax Rules, 1962,
amounts to Rs 1,18,50,000, which includes depreciation and
additional depreciation on imported machinery from Japan and
machinery purchased through borrowed fund from HDFC.
NovaMotion installed the machinery purchased from the
money borrowed from HDFC Bank Ltd. on 01-02-2026.
• Purchases (not debited to Statement of Profit and Loss) of Rs
12,00,000 were made on 13th March 2026 from M/s
GreenPower Components, a supplier registered as a micro

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 enterprise under the MSMED Act, 2006. As per written
agreement, the payment was to be made within 30 days from
the date of delivery. However, the payment was made on 14th
April 2026.
Compute the total income and tax liability of M/s NovaMotion
Vehicles Limited for AY 2026-27 as per the given information.
Ignore the provisions of MAT and Section 115BAA. The turnover in
PY 2023-24 of the company was Rs 402 Crores. [14 marks]
2. (a) Mr. Akshansh is a partner in the firm AKM LLP, Jaipur, Rajasthan
having three partners : Akshansh, Keyur and Muskan, having PSR in
the ratio of 40:30:30 respectively. Keyur resigned from the firm on 15th
April, 2025 when his capital balance stood at Rs 32 Lakhs. To
facilitate this transaction, CA Malav was appointed and he valued the
capital assets of AKM LLP as follows:

Assets Book Value FMV as per CA

Malav as on 15/4/25
Studio Premises in 25 Lakhs 50 Lakhs
Jaipur (Purchased in
2020)
Studio Premises in 15 Lakhs 45 Lakhs
Delhi (Purchased in
2021)
Studio Premises in 100 Lakhs 250 Lakhs
Ahmedabad
(Purchased in 2022)
Goodwill of AKM 70 Lakhs
Keyur was given Studio premises in Delhi and Rs 15 Lakhs to settle
his account with AKM LLP. Basis the following, the following
questions need to be answered:

• Discuss the tax treatment in hands of AKM LLP of the above

transaction. (6 marks)
• What would be taxability in hands of Keyur if he sells the
premises received from AKM to Hasmukh for Rs 72 Lakhs on
16th March 2026. (2 marks)

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 (b) Delta Global Inc., a foreign company, operates a branch in India.
For the financial year ending on 31st March 2026 (A.Y. 2026-27), head
office incurred certain administrative expenses outside India and
allocated Rs 1,85,00,000 to the Indian branch. The adjusted total
income of the A.Y. 2026-27 is a loss of Rs 25,20,200. The assessable
total income and other details for the preceding three previous years
relevant to the assessment years are as follows:

Particulars AY 2023-24 AY 2024-25 AY 2025-26

Assessable 18,00,000 28,00,000 41,00,000
Total Income
Depreciation 10,00,000 12,00,000 18,00,000
Unabsorbed 12,00,000 18,00,000 22,00,000
Depreciation
Deduction 21,00,000 29,00,000 34,00,000
under VI-A
B/f STCL 2,00,000 - 1,00,000
LTCL 5,00,000 2,00,000 -
B/f Speculative 2,00,000 17,00,000 15,00,000
Losses
Total VRS 20,00,000 60,00,000 90,00,000
Expense
Head Office 1,45,00,000 1,60,00,000 1,80,00,000
Expense
You are required to compute the amount of head office expenditure
deductible u/s 44C for the assessment year 2025-26. Assume Delta Inc
does not have POEM in India. (6 marks)
3. (a) Examine and discuss each of the independent cases of the
following Charitable Trusts as per the relevant provisions of the
Income-tax Act, 1961 for the A.Y. 2026-27:
a. Mr. Akshansh has made the following donations to Shri
Aparshakti Charitable Trust during FY 25-26: On 1/4/25 =
85,000 ; On 2/6/25 = 35,000 ; On 2/7/25 = 99,000 ; and 99,000
each in the months of August 2025 to March 2026. Shri
Aparshakti Charitable Trust provided benefits worth Rs
3,00,000 to Akshansh by applying its income. (3 marks)

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 b. A charitable institution, having its main object as “any other
object of general public utility”, carries on business in the
course of actual carrying out of such advancement of any other
object of general public utility and maintains separate books of
account in respect of business. The gross receipts during the
year is ₹ 2 crore, which comprises of receipts of ₹ 44 lakh from
such business and ₹ 1.56 crore by way of voluntary
contributions (not being corpus donations). It has applied 85%
of its gross receipts for charitable purposes. (2 marks)
c. Shaanti Foundation has earned rental income for the P.Y. 2025-
26 amounting to Rs 4,00,000. It received Rs 3,00,000 upto 31st
December, 2025 of such income. However, the balance of `
1,00,000 was received on 31st August, 2026. Upto what period
the institution can apply the same amount towards the objects
of the institution? The institution has exercised the relevant
option in this regard. (3 marks)
(b) Mr. Anil Talpade, aged 62 years, a resident individual, furnishes
the following particulars of income earned by him in India and in
Brazil for the previous year 2025-26. India does not have a double
taxation avoidance agreement with Brazil :

Particulars Amount (Rs)

Gross Salary in India 6,00,000
Professional Income received in Country 2,80,000
Brazil
Dividend Income in Country Brazil 88,000
LTCG on Equity Shares (STT Paid both at the 2,75,000
time of acquisition and sale)
Rent from House Property situated in Country 90,000
Brazil
Interest Income on FDRs with Bank of Baroda, 22,000
Pune Branch
Paid interest on Housing Loan to Punjab 2,00,000
National Bank, Pune branch for the
residential property, where he and his family
resides
Investment in PPF 1,50,000

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 Medical Insurance Premium paid for himself 32,000
Assume dividend income is exempt in Brazil and the tax rate on
other income in Brazil is 16%. Compute total income and tax
liability of Mr. Anil Talpade for the Assessment Year 2026-27 as per
the default tax regime u/s 115BAC. [6 marks]
4. (a) Examine the following independent cases w.r.t implications of Tax
Deducted at Source/Tax Collected at Source for the AY 2026-27:
a. Mr. Dhar has entered into a Horse Racing competitions with his
horse Jaskirat, which are held from the months of June 2025 to
December 2025. Jaskirat has performed exceptionally well and
as a result Mr. Dhar was paid Rs 9,000 on 1/7/25, Rs 8,500 on
15/9/25 and Rs 11,000 on 5/12/25 respectively. [3 marks]
b. Mr. Garg is a partner in the Firm “AKG Learning Solutions” and
is entitled to Rs 6,000 as Interest on his capital and Rs 15,000
as Fixed Salary for his contribution to the firm. The sums were
credited to his Capital Account on 15/3/25 and paid on 31/3/25
[2 marks]
c. Mr. Kush Maini has been recently selected as a Reserve Driver
by the Formula 1 Team, Alpine Mercedes. He has been given a
hefty joining bonus for the same and to celebrate this
milestone, he has decided to buy a Premium Wristwatch
“TagHeuer Monaco” worth Rs 11,16,000 on 20th January 2026
from the Proprietor of “Samay Traders”, who had Total Turnover
of Rs 1.01 Crores in Previous Year 2024-25. [3 marks]
(b) Vega Ltd., an Indian Company, is engaged in manufacturing
activities by importing raw material from Solaris Inc. of UK. Solaris Inc.
has a total loan of 1 million pounds from XYZ Bank of UK. Out of that,
Vega Ltd. guarantees 20% of total borrowings in case of any default
made by Solaris Inc. During the financial year 2025-26, Vega Ltd.
imported goods for Rs 60 crores from Solaris Inc. Solaris Inc.
supplied similar raw materials to unrelated parties with a mark-up of
20%, whereas, for Vega Ltd. it provided a mark-up of 25%. Vega Ltd.
was allowed to use the brand name of Solaris Inc., without any
payment and whereas the unrelated parties cannot use such brand

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 name in India. The annual cost of brand value is Rs 100 Lakhs. Vega
Ltd. was allowed credit period of 2 months, whereas for the unrelated
parties, Solaris Inc. allowed only 1 month as credit period. The
interest cost may be taken as 12% per annum and the purchases
were uniform throughout the year. The Assessing Officer referred the
matter to Transfer Pricing Officer (TPO) for determination of Arm
Length Price (ALP). You are required to :
(i) Compute the ALP and the adjustments to be made to the income
of Vega Ltd.
(ii) What is the due date for Vega Ltd. for furnishing audit report u/s
92E?
(iii) What amount of penalty is leviable on Vega Ltd., if it fails to
furnish audit report u/s 92E? [6 marks]
5. (a) Answer any two out of the following three parts: –
a. ABC Software Solutions Pvt. Ltd., a domestic company
engaged in software development at an IT park and employing
700 staff, deducted TDS aggregating Rs1.10 crores on salaries,
contractual payments and other sums up to 31.03.2026 for AY
2026-27. In March 2026, the assessee deposited part of the
TDS being Rs 38 lakhs and balance of Rs 72 lakhs was
deposited later in July 2026. However, the Additional
Commissioner of Income Tax issued a show cause notice
proposing to levy penalty under section 271C of the Income-tax
Act 1961 of the amount equal to TDS and also levied penal
interest under section 201(1A) of the Income-tax Act, 1961.
Feeling aggrieved and dissatisfied with the levy of
interest/penalty under the Income tax Act, 1961 on late deposit
of TDS, the company has approached you. Examine. Your
answer should cover Issue Involved ; Provision Applicable ; and
Analysis and Conclusion. [4 marks]
b. Mr. Ravi Prakash, a resident Indian aged 52 years, gifted a sum
of ₹ 30 lakhs to his wife Mrs. Sudha on the occasion of her 50th
birthday. Out of the said sum, Mrs. Sudha purchased a car for ₹

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 29,52,000 inclusive of RTO charges of ₹ 2,15,000, insurance of
₹ 51,575, extended warranty of ₹ 25,255 and accessories
charges of ₹ 35,460 during the P.Y. 2025-26. These charges
were shown separately in the invoice. Mrs. Sudha’s furnished
her Aadhaar No. to the dealer. She is a housewife and does not
have any income except rental income of ₹ 25,000 p.m. in
respect of a house property gifted to her by her father. Mr. Ravi
Prakash is of the opinion that his wife is not required to furnish
return of income, since her total income does not exceed the
basic exemption limit. Examine. [4 marks]
c. Novatech Industries Pvt. Ltd. filed its return of income for
assessment year 2024-25 on 25th October 2025. The return is
selected for regular assessment under section 143(3) for which
notice under section 143(2) is served on the company on 9th
July 2026. The company responded to the notice under section
143(2). Examine whether the service of the notice is within time
and if not, whether the assessment order can be challenged by
the assessee. [4 marks]
(b) Answer the following questions:
i. Explain the three fundamental pillars around which the Base
Erosion and Profit Shifting plans were structured. [3 marks]
ii. List down any 3 Extrinsic Aids to interpretation of a tax treaty.
[3 marks]

6. (a) Garg Holdings Ltd. holds 35% Equity Shares in Keyur Private
Limited. Keyur Private Limited has Rs 35,00,000 in it’s Reserves &
Surplus as on 31st March 2026. Keyur Private Limited extended a loan
of Rs 12,00,000 to Garg Holdings on the same date. Garg Holdings
Ltd. has declared and distributed Rs 15,00,000 as Dividend on 28th
September 2026 and is evaluating the options available to it from
such dividend being declared. Garg Holdings is liable to Tax Audit u/s
44AB. You are required to enumerate the reporting responsibility of
the aforementioned transactions as the Tax Auditor of Garg Holdings
Ltd. for the AY 2026-27. [6 marks]

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 (b) Illustratively explain what could be the consequences if any
arrangement is declared to be an Impermissible Avoidance
Arrangement u/s Section 98 of the Income Tax Act, 1961. [4 marks]

(c) An agreement has been made between Orange Inc., a company

registered in Country A, and Unicorn Ltd., an Indian company, to
provide technical know-how. Orange Inc.'s sister company, XYZ LLC
of Country A, has received an Advance Ruling about a similar
technological know-how arrangement with another Indian business,
MNC Ltd. The agreement is expected to be of Rs 350 crores and
expected tax liability would be Rs 120 crores. Can Unicorn Ltd. make
an application to the Board for Advance Rulings to issue same ruling
for Unicorn Limited in accordance with the Act? Examine whether the
Board can ask for the submission of books of accounts when a
decision on a related matter has already been made. Examine in the
context of the provisions of the Income-tax Act, 1961? [4 marks]

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