FINAL EXAMINATION SET - 1

MODEL ANSWERS TERM – DECEMBER 2023

PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.
Where considered necessary, suitable assumptions may be made and
clearly indicated in the answer.

SECTION – A (Compulsory)

1. Choose the correct option: [15 x 2 =30]

(i) Moon Ltd. has received ` 99 lakhs (net of TDS) as dividend from a domestic company on 31 st
Dec 2023. It has distributed ` 105 Lakhs as dividend to its shareholders on 31 st July 2023.
What is the amount of deduction available to Moon Ltd. in respect of such dividend?
(a) ` 99 Lakhs
(b) ` 105 Lakhs
(c) ` 110 Lakhs
(d) Nil

(ii) Star Ltd. set up a manufacturing unit in Chennai on 1st August 2022. It invested ` 30 lakhs in
new plant and machinery on 1st August 2022. It invested ` 50 lakhs in new plant and
machinery on 1st Dec 2022, out of which ` 10 lakhs was second hand assets. What is the amount
of depreciation allowed u/s 32 for the AY 2023-24?
(a) ` 8,25,000
(b) `18,25,000
(c) ` 26,00,000
(d) ` 17,50,000

(iii) The book profit of Sun Ltd. is ` 40 lakhs and its total income is ` 18 lakhs. Calculate tax
liability.
(a) ` 6,24,000
(b) ` 5,61,600
(c) ` 12,48,000
(d) ` 2,80,800

(iv) A domestic company discloses its taxable income as ` 101 lakhs. What is the tax liability?
(a) ` 32,24,000
(b) ` 33,71,780
(c) ` 31,51,200
(d) `34,49,680

(v) A firm, which do not have book profits, can claim deduction u/s 40(b) to the extent of:
(a) 100% of payment
(b) ` 1,50,000 or 100% of payment, whichever is lower

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
(c) ` 1,50,000 or 100% of payment, whichever is higher
(d) ` 1,50,000

(vi) Assessment order in response to notice u/s 143(2) shall be completed within a period of:
(a) 12 months from the end of relevant financial year
(b) 24 months from the end of relevant financial year
(c) 12 months from the end of relevant assessment year
(d) 24 months from the end of relevant assessment year

(vii) Rounding off of tax in respect of which interest is to be calculated to nearest multiple of:
(a) `100
(b) `10
(c) ` 1
(d) Not required

(viii) Income Tax Appellate Tribunal can rectify its own order if it is:
(a) Apparent mistake
(b) Any mistake
(c) Any mistake other than apparent mistake
(d) None of the above

(ix) Equalization levy is applicable if the aggregate amount of consideration for specified
transactions exceeds:
(a) ` 10,000
(b) ` 1,00,000
(c) ` 10,00,000
(d) ` 1 crore

(x) The relief where there is no Avoidance of Double Taxation Agreement, is:
(a) Bilateral relief
(b) Specified relief
(c) Unilateral relief
(d) No relief

(xi) If income is taxed twice in more than one country but in the hands of different tax payers is
called:
(a) Juridical Double Taxation
(b) Economic Double Taxation
(c) Treaty Double Taxation
(d) Deemed Double Taxation

(xii) Range concept principle is applied under Transfer Pricing if there is:
(a) One reasonable price
(b) more than one reasonable price but not more than five
(c) More than five reasonable prices

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
(d) None of the above

(xiii) Specified Domestic Transactions are covered under Transfer Pricing Provisions if aggregate
value of such transactions exceeds:
(a) `5 Crores
(b) ` 10 crores
(c) ` 20 crores
(d) No limit

(xiv) The time limit for passing an order by Transfer pricing officer is within:
(a) 2 years from the end of financial year of reference made
(b) 1 year from the end of financial year of reference made
(c) No time limit
(d) None of the above

(xv) Yogi Ltd. of Varanasi, India exports “Product X” to YO Ltd of Tokyo, Japan an associated
enterprise for ` 5,300 per product. Yogi Ltd. also exports similar product to Y Ltd and OY
Ltd, who are unrelated for ` 5,350 and ` 5,550 respectively. What is the price considered to
compute profits from transaction with YO Ltd?
(a) ` 5,400
(b) ` 5,300
(c) ` 5,450
(d) None of the above

Answer:

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv)
b b a a b c a a b c b c c a b

SECTION – B
(Answer any five questions out of seven questions given. Each question carries 14 Marks)

2. Given below is the Profit and Loss A/C of Mitra Ltd.

Dr. Cr.
` `
Salaries 3,00,000 Gross Profit 10,00,000
Donation to charitable trust 40,000 Withdrawal from Reserve fund 24,000
Contribution to approved 30,000 Withdrawal from Revaluation 25,000
research Reserve Fund
Staff welfare Fund 25,000 Agricultural income 40,000
Proposed dividend 75,000 Short term capital gain 36,000
Bad debts 5,000 Dividend 30,000
Provision for doubtful debts 15,000 Miscellaneous income 45,000

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
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DIRECT TAX LAWS AND INTERNATIONAL TAXATION
Provision for GST 35,000
Provision for ascertained liability 10,000
Income tax 50,000
Penalty 4,000
Depreciation 85,000
Cultivation expenses 12,000
General reserved 2,000
Long term capital loss 16,000
Net Profit 4,88,000
12,00,000 12,00,000
Other Information:
1. Depreciation includes ` 20,000 on account of revaluation
2. Dividend ` 50,000 paid on 30th September, 2023
3. GST ` 30,000 paid on 31st October, 2023
4. Brought forward items:
Relating for FY 2018-19 Tax Purpose Accounts Purpose
(a) Brought forward business loss 25,000 30,000
(b) Unabsorbed depreciation 15,000 20,000

Calculate the tax liability of Mitra Ltd applying MAT u/s 115JB. [14]

Answer:

(`) (`)
Book Profit Business income
Net Profit 4,88,000 4,88,000
(+) Donation - 40,000
(+) S.W.F 25,000 25,000
(+) Dividend 75,000 75,000
(+) PBD 15,000 15,000
(+) GST - 5,000
(+) Ascertained - 10,000
(+) Income Tax 50,000 50,000
(+) Penalty - 4,000
(+) Cultivation 12,000 12,000
(+) Reserve 2,000 2,000
(+) LTCL - 16,000
(-) BF Business Loss Or Unabsorbed depreciation (Lower) 20,000 -
(-) Withdrawal 24,000 24,000
(-) Revaluation Reserve (max up to. dep) 20,000 25,000
(-) Depreciation 65,000 -
(-) Agriculture 40,000 40,000
(-) STCG - 36,000
(-) Dividend - 30,000
Book Profit 5,83,000 6,07,000

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
(-) BF Loss/ Depreciation 40,000
Business Income 5,67,000

Calculation of Tax Liability of X Ltd.:

Summary (`)

Profits & Gains of Business & Profession 5,67, 000

Short Term Capital Gain 36,000
Income from Other Sources 30,000
Gross Total Income 6,33, 000
(-) Sec 80M (30,000 Or 50,000) 30,000
6,03, 000

Normal Tax @ 30% = 1,80,900

(+) HEC @4% 7,236
1,88,136

MAT @ 15% = 87,450

(+) HEC @4% 3,498
90,948
Tax payable = ` 1,88,140

3. (a) Mr Gopal, is a salaried employee who submits his income particulars for two financial years:
Income FY 2022-23 (`) FY 2021-22
(`)
Basic Salary 10,00,000 7,00,000
Dearness allowance (3/4 is part of retirement benefits) 2,00,000 1,80,000
House Rent Allowance 4,00,000 4,00,000
Rent Paid by Gopal 3,00,000 3,00,000
Arrears of Salary 3,00,000 -
Life insurance Premium 65,000 63,500

You are required to calculate amount of exemption allowed in respect in HRA, amount of
deduction in respect of life insurance premium and amount of relief in respect of arrears of
salary u/s 10(13A), u/s 80C and u/s 89(1) respectively. [7]

(b) Smile Ltd. shifts its industry from urban area in Jaipur to a remote village in Rajasthan state.
In the process of shifting the company sells the following assets and purchases new assets at
its new place:
Land (`) Building (`) Plants &
Machinery (`)
Cost of acquisition (as per section 50) NA 8,50,000 4,50,000
Sale proceeds 30,00,000 25,00,000 9,50,000
Transfer expenses 30,000 25,000 9,500
Cost of new assets 12,00,000 8,00,000 4,00,000
(acquired during April 2023)

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION

Land is acquired during 2012-13 for ` 1,00,000 (CII:200). Compute capital gain and suggest
a scheme of tax planning. [7]

Answer:

(a)
2022-23 (`) 2022-23 (`) 2021-22 (`) 2021-22 (`)
B. Pay 10,00,000 10,00,000 7,00,000 7,00,000
DA(3/4) 2,00,000 2,00,000 1,80,000 1,80,000
HRA 2,15,000 2,15,000 1,83,500 1,83,500
Arrears 3,00,000 - 3,00,000 -
GSI 17,15,000 14,15,000 13,63,500 10,63,500
(-) S.D 5,0000 50000 50000 50000
NSI/GTI 16,65,000 13,65,000 13,13,500 10,13,500
(-) Sec. 80C 65,000 65,000 63,500 63,500
NIT 16,00,000 13,00,000 12,50,000 9,50,000
TAX 3,04,200 2,10,600 1,95,000 1,06,600

Relief = (`3,04,200 - `2,10,600) - (`1,95,000 - `1,06,600) = `5,200

Tax Payable = `304200 - `5200 = `2,99,000

Calculation of HRA: (`) (`)

(i) Actual HRA 4,00,000 4,00,000
(ii) Rent-10% of Salary 1,85,000 2,16,500
(iii) 40% of Salary 4,60,000 3,34,000
Taxable income 2,15,000 1,83,500
Salary for HRA 11,50,000 8,35,000

(b) Computation of Capital gain:

Land (`) Building (`) Plant (`)
Sale proceeds 30,00,000 25,00,000 9,50,000
(-) Transfer Expenses 30,000 25,000 9,500
Net Sales Consideration 29,70,000 24,75,000 9,41,500
(-) Indexed Cost of Acquisition
331 1,65,500 - -
[1,00,000 × ]
200
(-) Cost of new asset - - -
(-) OWDV - 8,50,000 4,50,000
Long Term Capital Gain (LTCG) 28,04,500 16,25,000 4,91,500
(-) Sec 54G 2,83,500 16,25,000 4,91,500
Long Term Capital Gain (Net) 25,21,000 Nil Nil

Tax Planning:

Purchase new assets within relevant financial year in such case, taxable LTCG will be `13,21,000.

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION

4. (a) Examine how do you treat the following items when X Ltd. is merging with Y Ltd. on 1st
January 2023 on the assumption:
A. Condition u/s 2(1B) and u/s 72A does not satisfy
B. Condition u/s 2(1B) satisfy but conditions u/s 72A not satisfy
C. Conditions u/s 2(1B) and u/s 72A are satisfied

Other Information of X Ltd.:

(i) Business Profits (before adjusting losses and expenses) `60,000
(ii) Expenses on merger `2,00,000
(iii) VRS Compensation (Paid during 2020-21) `4,00,000
(iv) Sale consideration of non-depreciable capital assets `20,00,00
(v) Indexed cost of acquisition of non-depreciable capital assets `12,00,000
(vi) Sale consideration of depreciable assets `10,00,000
(vii) WDV of depreciable assets `7,00,000
(viii) Non-speculation business loss relating to 1994-95 ` 3,00,000
(ix) Unabsorbed depreciation relating to 2020-21 ` 1,50,000
(x) Long term Capital loss relating to 2021-22 ` 2,00,000

Business profits of Y Ltd. (before adjusting losses and expenses) ` 30,00,000 and long term
capital gain of Y Ltd. (before adjusting losses) ` 3,00,000 [7]

(b) A non-resident having branch office in India submits the following information relating to the
branch.
(i) Net total income ` 30,00,000
(ii) Deduction (Chapter VIA) ` 2,00,000
(iii) Brought forward business loss ` 1,00,000
(iv) Brought forward house property loss ` 30,000
(v) Unabsorbed depreciation ` 1,50,000
(vi) Expenses reimbursed by branch to Head office ` 3,00,000
You are required to compute total income of the branch after adjusting the amount of
deduction allowed u/s 44C. [7]

Answer:

(a) (A) If both conditions not satisfied -

X Ltd: (`)
Business income 60,000
(-) VRS (1/5) 80,000
Business Loss (-) 20,000

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
Computation of Capital gain:
Long Term (`) Short term (`)
Full Value of Sales 20,00,000 10,00,000
Consideration
(-) Indexed Cost of 12,00,000 7,00,000
Acquisition/WDV
Long Term Capital Gain 8,00,000 3,00,000
(LTCG)/ Short Term Capital
Gain (STCG)
(-) Long Term Capital Loss / 2,00,000 20,000
business loss/
Depreciation - 1,50,000
6,00,000 1,30,000
Y Ltd.: (`)
Business income 30,00,000
(-) Depreciation [10,00,000 x 15% x ½] 75,000
Profits & Gains of Business & Profession (PGBP) 29,25,000
LTCG 3,00,000
TI 32,25,000

(B) If Condition u/s 72A does not satisfy -

X Ltd. (no capital gain) (`)
Business income 60,000
(-) Merger (1/5) 40,000
(-) VRS 80,000
(-) 60,000
275
Depreciation [70,00,000 x 15% x ] 79,110
635
Y Ltd. (`)
Business income 30,00,000
90 25,890
(- ) Depreciation [7,00,000 x 15% x ]
365
PGBP 29,74,110
LTCG 3,00,000
32,74,110

(C) If both conditions satisfy -

X Ltd. (no capital gain) (`)
Business income 60,000
(-) Merger (1/5) 40,000
(-) VRS 80,000
(-) 60,000

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
275
Depreciation [70,00,000 x 15% x ] 79,110
635

Y Ltd. (`)
Business income 30,00,000
(-) Depreciation 25,890
(-) business loss of X Ltd. 60,000
(-) Depreciation of X Ltd. 79110
(-) BF business loss of X Ltd. 3,00,000
(-) BF depreciation 1,50,000
PGBP 23,85,000
LTCG 3,00,000
26,85,000

(b) Amount of Deduction u/s 44C:

Adjusted Total Income (ATI) = ` [30,00,000+2,00,000+1,00,000+1,50,000+3,00,000] = `
37,50,000
Amount of deduction: @5% of ATI or actual expenses WEL i.e., 5% of ` 37,50,000 Or ` 3,00,000
whichever is lower.
Amount disallowed = ` (3,00,000-1,87,500) = 1,12,500
Total income = ` (30,00,000 + 1,12,500) = ` 31,12,500

5. (a) An assesse is aggrieved by the following orders:

(i) Order passed u/s 143(3) by the Assessing officer
(ii) Order passed u/s 263 by the commissioner of Income Tax
(iii) Order passed u/s 254 by the Tax Tribunal (ITAT)
The assessee is willing to know the remedies available and the time limit against each remedy
under the Income-Tax Act, 1961. Explain. [7]

(b) The total income of an individual assesse is ` 8 lakhs. Tax deducted by various payers ` 30,000.
Tax is paid by way of self-assessment. ROI (due date 31-07-2023) submitted on 31-10-23.
Assessment completed on 31-12-2023. Discuss with reasons the interest payable under various
provisions. [7]

Answer:

(a) Remedies and time limit:

(i) If an assessee is aggrieved against the orders passed u/s 143(3) by the Assessing officer, he may
appeal to the Commissioner of Income Tax (Appeals) U/S 246A(1) within 30 days of the date of service
of order.
(ii) If an assessee is aggrieved against the order passed u/s 263 by CIT, he may appeal to ITAT u/s
253(1)(c) within 60 days of the date of its communication to assessee.
(iii)If an assessee is aggrieved against the order passed u/s 254 by ITAI, he may appeal to High Court
u/s 260A within 120 days of the date of receipt of order of assessee, only if it involved SQOL.

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 15 SYLLABUS 2022
DIRECT TAX LAWS AND INTERNATIONAL TAXATION
(b) Calculation of interest (`)
Tax on ` 8,00,000 = 75,400
(-) TDS 30,000
45,400

(`)
Interest u/s 234A = 45,400 x 1 % x 3 = 1362
Interest u/s 234B = 45,400 x 1% x 9 = 4086
Interest u/s 243C = 45,400 x 15% x 1% x 3 = 204.30
45,400 x 45% x 1% x 3 = 612.90
45,400 x 75% x 1% x 3 = 1,021.50
45,400 x 100% x 1% x 1 = 454
Total Interest 7,740

6. (a) Analyze the special provisions relating to Double Tax Avoidance Relief in case of specified
associations in India. Explain with suitable example. [7]

(b) Mr. Prabhas, a resident has earned the following incomes for the year 2022-23.
(i) Income from house property in India but received in UK ` 7,00,000
(ii) Royalty on patents outside India ` 5,00,000
(iii) Past untaxed income brought into India ` 2,00,000
(iv) Tax paid in respect of income (i), (ii) and (iii) above ` 90,000, ` 75,000 and ` 20,000
respectively.
Calculate tax liability and relief if there is:
(A) DTAA under tax exemption method
(B) DTAA under tax credit method
(C) NO DTAA. [7]

Answer:
(a) Double Tax Avoidance Relief (DTAR) is case of specified association [Sec 90A]:
(i) If a specified association in India enters into an agreement with any specified association in a
specified territory outside India, Government of India may make provisions for implementing such
agreement for DTAR and exchange of information to prevent evasion Or avoidance of tax and recovery
of Tax.
(ii) Provisions of Income-tax Act shall apply to the extent they are more beneficial to the assessee.
(iii) For example; if tax is paid of foreign income outside India, no tax is payable on such foreign
income in India.

(b) Calculation of Tax Liability:

Under tax exemption Under tax credit Under unilateral
Income from 7,00,000 7,00,000 7,00,000
House Property
Income from - 5,00,000 5,00,000
Other Sources
7,00,000 12,00,000 12,00,000
Tax 54,600 1,79,400 1,79,400
(-) Relief - 75,000 74,750
1,04,400 1,04,650

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
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DIRECT TAX LAWS AND INTERNATIONAL TAXATION

Notes: -
75000
1. Average Tax Rate on total income =  100  15%
5,00,000
179400
2. Average Tax Rate on foreign income = 100  14.95%
12,00,000
3. Relief = 5,00,000 X 14.95 % = 74750

7. (a) X Ltd, an Indian company, supplies 50,000 products to Y Ltd, a German company and which
associated, at FOB price of ` 4000(after a discount of ` 200) per product. It also supplies 5000
products of Z Ltd which is not associated, at CIF price of ` 5800 (including warranty charges
`300) per product. Insurance and freight charges are ` 600. Profit disclosed by X Ltd is ` 8
Crore. Calculate reasonable profits of X Ltd by applying ALP if X Ltd is covered u/s 10AA.
[7]
(b) X Ltd, an Indian company has borrowed ` 50 crores from Y Ltd, an American company at an
interest rate of 8% pa. X Ltd submits the following particulars:
(i) Net Profit after interest, income tax, depreciation and dividend ` 5 Crore
(ii) Income tax ` 1.5 crore
(iii) Depreciation ` 1 crore
(iv) Dividend ` 0.5 crore.
Compute taxable profits of X Ltd if book value of assets is ` 98 crores. Does it make any
difference if book value of assets is ` 99 crores. [7]

Answer:

(a) Calculation of Reasonable Profit:

Arm’s Length Price = ` (4,000+200+300+600) = ` 5,100 Or Recorded Price ` 5,800 [Whichever
is higher]
Differential Price = ` 700
Exempted income = ` 8 Cr
Taxable income = 700 x 50,000= ` 3.5 Cr

(b) Disallowed interest u/s 94B.

(i) Interest paid – 30% of EBITDA
4,00,00,000 - 30 % of 12,00,00,000 = 40,00,000
(ii) Interest paid = 4,00,00,000
Disallowed interest = 40,00,000 (WEL)
Taxable income = 12,00,00,000-3,60,00,000-1,00,00000 = 7,40,00,000
Note:
No disallowances if interest is paid to unrelated
Person Taxable income = 12,00,00,000- 4,00,00,000-1,00,00,000=7,00,00,000

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 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
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DIRECT TAX LAWS AND INTERNATIONAL TAXATION
8. (a) X Ltd. has two units, Unit A and Unit B engaged in operating a warehouse for storage of
Computer Peripherals and mobile spares respectively, since the year 2017. Y Ltd. takes over
Unit B of X Ltd. by way of Slump Sale for ` 350 lakhs on 01-10-2022. The expenses incurred
for this transfer were ` 10,50,000.
Balance sheet (Extract) of X Ltd. as on 30-09-2022

Liability ` (in lakhs) Asset ` (in lakhs)

Paid up equity share capital 550 UNIT A
Fixed assets 160
General reserve 180 Debtors 250
Revaluation reserve(Unit B) 110 Inventories 270
Bank Loan(70% for unit B) 115 UNIT B
Fixed assets 280
Creditors (45% for unit B) 280 Debtors 175
Inventories 100
1235 1235
Other information:
(i) Fixed assets of unit B includes a land purchase at `50 lakhs during 2016 and revalued
at ` 160 lakhs. Its stamp duty value is ` 150 lakhs
(ii) Fixed assets of unit B includes a plant and machinery acquired from unit A for `30
Lakhs

You are required to analyse and answer following questions:

(A) What is the profit on transfers from unit A to unit B?
(B) What is cost of acquisition for the purpose of computing capital gain?
(C) What is the tax liability on capital gain?
(D) What is the tax liability if above transaction is covered u/s 2(19AA) under demerger
scheme? [7]

(b) Examine the consequences that would follow if the Assessing officer make adjustment to
Arm’s length price in international transactions of the assessee resulting in increase in taxable
income. Discuss the remedies available to the assessee to dispute such adjustment. [7]

Answer:

(a) Case Study

(A) Profit on transfer = WDV of plant (if there is no slump sale)

(B) Cost of acquisition = Assets – Liabilities = 238,50,000

Assets = Book value of land + WDV of PM+ other fixed assets + Debtors + Inventories
= 50,00,000+30,00,000+90,00,000+175,00,000+100,00,000
= 445,00,000
Liabilities = 70% of loan + 45% of creditors
= 20650000

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MODEL ANSWERS TERM – DECEMBER 2023
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DIRECT TAX LAWS AND INTERNATIONAL TAXATION

(C) Tax on Capital gain

Full value of sale consideration 350,00,000
(-) Transfer Expenses 10,50,000
(-) Net worth 238,50,000
LTCG 1,01,00,000
Tax @ 20% = 2020000

(D) If the above transaction is covered u/s 2(19AA).

Tax liability = Nil

(b) Consequences of adjustment of Arm’s Length Price (ALP):

(i) No deduction under chapter VIA shall be allowed from the income so increased.
(ii) No exemption under section 10AA shall be allowed to the income so increased.
(iii) NO corresponding adjustment shall be made to the total income of the other associated enterprise.

Remedies available to the assessee:

(i) He can file an appeal u/s 246A to CIT(A) against the order within 30 days of date of Service
(ii) He can opt to file an application for revision of order u/s 264 within one year from the date on
which the order sought to the revised is communicated, only if time limit to appeal u/s 246A has
expired.

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Directorate of Studies, The Institute of Cost Accountants of India