Amity Campus

Uttar Pradesh
India 201303

ASSIGNMENTS
PROGRAM: MFC
SEMESTER-II
Subject Name
Study COUNTRY
Roll Number (Reg.No.)
Student Name

:
:
:
:

CORPORATE TAX PLANNING

BOTSWANA
MFC001112014-2016059
ITSENG ITUMELENG LETSHOLO

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
Objective or one line Questions

MARKS
10
10
10

b)
c)
d)
e)

Total weightage given to these assignments is 30%. OR 30 Marks

All assignments are to be completed as typed in word/pdf.
All questions are required to be attempted.
All the three assignments are to be completed by due dates and need to be submitted
for evaluation by Amity University.
f) The students have to attached a scan signature in the form.

Signature :
Date
:

20/06/2015

( ) Tick mark in front of the assignments submitted

Assignment A
Assignment C
Assignment B

CORPORATE TAX PLANNING

ASSIGNMENT A

1. Distinguish between tax avoidance and tax evasion?

Tax avoidance is the legitimate minimizing of taxes, using methods approved by
the IRS. Businesses avoid taxes by taking all legitimate deductions and by
sheltering income from taxes by setting up employee retirement plans and other
means, all legal and under the Internal Revenue Code or state tax codes.
Tax evasion on the other hand, is the illegal practice of not paying taxes, by not
reporting income, reporting expenses not legally allowed, or by not paying taxes
owed. Tax evasion is most commonly thought of in relation to income taxes, but tax
evasion can be practiced by businesses on state sales taxes and on employment
taxes. In fact, tax evasion can be practiced on all the taxes a business owes.
Tax avoidance

Tax evasion

Tax avoidance is the arrangement of

one's financial affairs to minimize
tax liability within the law.
Businesses uses of legal methods to
modify an individual's financial
situation in order to lower the
amount of income tax owed. This is
generally accomplished by claiming
the permissible deductions and
credits.

Tax evasion is the illegal

nonpayment or underpayment of
tax. Typically, tax evasion
schemes involve an individual or
corporation misrepresenting their
income to the Internal Revenue
Service (IRS).

2. What do you understand by control and Management of a company?

The term control and management refers to head and brain which directs
the affairs of policy, finance, disposal of profits and vital things concerning the
management of a company. Usually control and management of a companys affairs
is situated at the place where meetings of its Broad of directors are held. In the case
of a subsidiary company managed by its local Board of directors, it is difficult to

establish that control and management of its affairs vests at the place where the
parent company resides.
3. What is VAT ?
Value-Added Tax is commonly known as VAT. VAT is an indirect tax on the
consumption of goods and services in the economy. Revenue is raised for
government by requiring certain businesses to register and to charge VAT on the
taxable supplies of goods and services. These businesses become vendors that act as
the agent for government in collecting the VAT.
VAT is charged at each stage of the production and distribution process and it is
proportional to the price charged for the goods and services.
VAT is presently levied at the standard rate of 14% on the supply of most goods and
services and on the importation of goods. The VAT on the importation of goods is
collected by customs. There is a limited range of goods and services which are
subject to VAT at the zero rate or are exempt from VAT
4. What is the concept of avoidance of double taxation?
International double taxation occurs when two or more states impose taxes on the
same taxpayer for the same subject matter. Most commonly, double taxation arises
because states tax not only domestic assets and transactions but also assets and
transactions in other states which benefit resident taxpayers, resulting in the overlap
of the states' tax claims. Bilateral double tax treaties address and reduce the extent
of this double taxation. The efficacy of the treaty approach, however, depends on
common and workable interpretations of the treaty terms.
It has come to the notice of the Board that sometimes effect to the provisions of
double taxation avoidance agreement is not given by the Assessing Officers when
they find that the provisions of the agreement are not in conformity with the
provisions of the Income-tax Act, 1961. The correct legal position is that where a
specific provision is made in the double taxation avoidance agreement, that
provisions will prevail over the general provisions contained in the Income-tax Act.
In fact that the double taxation avoidance agreements which have been entered into
by the Central Government under section 90 of the Income-tax Act, also provide
that the laws in force in either country will continue to govern the assessment and

taxation of income in the respective countries except where provisions to the

contrary have been made in the agreement.
Thus, where a double taxation avoidance agreement provides for a particular mode
of computation of income, the same should be followed, irrespective of the
provisions in the Income-tax Act. Where there is no specific provision in the
agreement, it is basic law, i.e., the Income-tax Act that will govern the taxation of
income.
Harmonization of Tax Rates
Tax treaties usually specify the same maximum rate of tax that may be imposed on
some types of income. As an example, a treaty may provide that interest earned by a
nonresident eligible for benefits under the treaty is taxed at no more than five
percent (5%). However, local law in some cases may provide a lower rate of tax
irrespective of the treaty. In such cases, the lower local law rate prevails.
Resolving of Disputes in Interpretation
If there are any disputes in the interpretation/ implementation of the terms of DTA
Agreements, normal remedies of appeal etc. provided in the Income-tax Act are
available to the aggrieved party. The DTA Agreements also contain mutual
agreement procedure. The aggrieved party may approach the Competent Authority
of the contracting State wherein he is a resident, who, if he is unable to resolve the
dispute by himself will approach the competent Authority of the other Contracting
State to arrive at a solution after mutual discussion.
Advance Ruling
In respect of interpretation of terms contained in DTA Agreement the Indian
Income-tax Act contains a special provision which is offered to those Nonresidents who would like to have advance ruling on a matter of law or fact in
relation to a transaction undertaken/proposed to be undertaken by them. The
facilities available in such provision can be availed of by the Non-residents in the
matters regarding Double Taxation of income also.
5. What is Gross Total Income?
GROSS TOTAL INCOME:
As per the Income Tax Act Income is Chargeable to tax under five heads, those
being:

Salaries
Income from House Property
Profits and Gains from Business or Profession
Capital Gains.
Income from Other Sources
The aggregate income under these heads is termed as Gross Total Income. It
is always calculated before providing exemptions under Chapter VIA, i.e.,
deductions from Section 80CCC to 80U.
TOTAL INCOME:
Total Income stated simply is the Gross Total Income as reduced by amount
permissible as deduction under Sections 80CCC to 80U.

Assignment B
1. How the incidence of tax depends upon Residential Status of an assesse?
Tax incidence on an assesse depends on his residential status. For instance, whether
an income, accrued to a person outside India, is taxable in India depends upon the
residential status of the person in India. Similarly, whether an income earned by a
foreign national in India (or outside India) is taxable in India depends on the
residential status of the individual, rather than on his citizenship. Therefore, the
determination of the residential status of a person is very significant in order to find
out his tax liability.
The residential status of an assesse is to be determined in respect of each previous
year as it may vary from previous year to previous year. The foreign investors may
be Indian nationals residing outside India, person of Indian origin and other foreign
investors including corporations.
Under Section 2(31) of the Income Tax Act, the term person includes an individual,
a Hindu Undivided Family, a Partnership Firm, a Company, an Association of
Persons, a Body of Individual, a Local Authority and every other Artificial Juridical
Entity. Similarly, under FEMA, clause (u) of Section 2, person includes all the
above categories and also any agency, office or branch owned or controlled by any
such person.
The residential status of a person has been dealt under the Income Tax Act, 1961,
Foreign Exchange Management Act, 1999 (FEMA), Companies Act, 1956 and
under the proposed Direct Tax Code Bill 2009
2. How the tax planning with reference to new business is to be done?
When a person decided to start a business the number of factors to be considered:

Location, Nature & Size of business

Form of business
Capital structure
Setting up and commencement of business

3. Telco Ltd., a company incorporated and managed in South Africa and engaged
in telecommunication services, is going to invest in China. Its Chinese
operations will be both manufacturing and providing services. Telco intends to
penetrate the Chinese market for telecommunication and according to some
market research carried out before the operations will be highly profitable
within a couple of years.
How to structure Telco's investment in a tax effective manner?
Dividends paid by the Chinese subsidiary to the South African parent will not
trigger Chinese withholding tax if the South African investor qualifies as a "foreign
investment enterprise" under Chinese law. This is the case, among others, if the
Chinese company is wholly foreign-owned. Upon receipt of the dividends by the
parent in South Africa, additional South African corporate tax may be due.
The channeling of the dividends to a group holding company, and subsequently to
the South African investor in such a way that South African tax due on the dividend
received, could be an interesting solution.
This could be achieved by structuring the investment through a Seychelles group
holding company established as a CSL (special license company) under Seychelles
law. The dividends received by this company are only subject to 1.5% tax in the
Seychelles.
Due to special provision in the treaty between the Seychelles and South Africa, no
further tax is payable in South Africa upon redistribution of the dividends to the
parent, if any. Therefore, the maximum tax burden is limited to 1.5%. If this would
be preferred, the dividends received in the Seychelles can, of course, also be
accumulated in the Seychelles

Assignment 3 (40 MCQs)

QUESTION
1.
2.
3.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

ANSWER
B
A
B
A
D
C
C
B
A
B
A
B
D
B
C
A
B
A
B
A

QUESTION
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

ANSWER
B
B
D
B
B
C
A
C
B
A
D
A
B
B
B
B
B
B
A
A