UPSC Prelims Practice Questions — BRICS must work in sync on transfer-pricing disputes: FM

Q1. Under the Income-tax Act, 1961, the computation of the arm's length price of an international transaction may be referred to the Transfer Pricing Officer by the Assessing Officer only with the previous approval of which one of the following authorities?

  • A. The Central Board of Direct Taxes, Department of Revenue
  • B. The Dispute Resolution Panel constituted for the assessee
  • C. The Principal Commissioner or Commissioner of Income-tax
  • D. The Competent Authority of India designated for treaty matters

Q2. Consider the following statements regarding the respective roles of the Transfer Pricing Officer and the Assessing Officer in determining the arm's length price under the Income-tax Act, 1961: 1. Where a reference has been made, the Transfer Pricing Officer determines the arm's length price by an order in writing and sends a copy of that order both to the Assessing Officer and to the assessee. 2. On receipt of that order, the Assessing Officer proceeds to compute the total income of the assessee in conformity with the arm's length price so determined. 3. The arm's length price is arrived at by applying every prescribed method to the transaction and adopting the arithmetic mean of the values so obtained. Which of the statements given above is/are correct?

  1. Where a reference has been made, the Transfer Pricing Officer determines the arm's length price by an order in writing and sends a copy of that order both to the Assessing Officer and to the assessee.
  2. On receipt of that order, the Assessing Officer proceeds to compute the total income of the assessee in conformity with the arm's length price so determined.
  3. The arm's length price is arrived at by applying every prescribed method to the transaction and adopting the arithmetic mean of the values so obtained.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q3. An advance pricing agreement under section 92CC of the Income-tax Act, 1961 is entered into by which authority, and with whose approval?

  • A. By the Principal Commissioner of Income-tax, with the approval of the Central Board of Direct Taxes
  • B. By the Central Board of Direct Taxes, with the approval of the Central Government
  • C. By the Transfer Pricing Officer, with the approval of the Principal Commissioner of Income-tax
  • D. By the Dispute Resolution Panel, with the approval of the Central Board of Direct Taxes

Q4. In India's Advance Pricing Agreement programme, the 'rollback' provision refers to which one of the following?

  • A. Revision of the terms of a signed agreement for its remaining years where the facts underlying it change materially
  • B. Declaring an agreement to be void from inception where it was obtained by fraud or misrepresentation of facts
  • C. Conversion of an agreement signed with the Indian authority alone into one covering the treaty partner as well
  • D. Application of the agreed transfer pricing methodology to four years preceding the years covered by the agreement

Q5. With reference to the OECD/G20 Two-Pillar Solution, consider the following descriptions of its components: 1. Income Inclusion Rule — the primary rule, under which top-up tax is paid at the level of the parent entity in proportion to its ownership in low-taxed entities. 2. Undertaxed Profits Rule — the backstop, under which remaining top-up tax is divided among adopting jurisdictions in proportion to the substance located in each. 3. Amount B — the mechanism that reallocates a defined portion of the residual profits of in-scope multinationals to market jurisdictions. 4. Qualified Domestic Minimum Top-up Tax — a domestic charge that lets the jurisdiction where the low-taxed profits arise collect the top-up tax itself. Which of the above is/are correctly identified?

  1. Income Inclusion Rule — the primary rule, under which top-up tax is paid at the level of the parent entity in proportion to its ownership in low-taxed entities.
  2. Undertaxed Profits Rule — the backstop, under which remaining top-up tax is divided among adopting jurisdictions in proportion to the substance located in each.
  3. Amount B — the mechanism that reallocates a defined portion of the residual profits of in-scope multinationals to market jurisdictions.
  4. Qualified Domestic Minimum Top-up Tax — a domestic charge that lets the jurisdiction where the low-taxed profits arise collect the top-up tax itself.
  • A. 1 and 3
  • B. 2 and 4 only
  • C. 1, 2 and 4
  • D. 1, 3 and 4

Q6. In India's phased withdrawal of its unilateral digital-economy tax measures, which one of the following was the first to go, ceasing to apply to consideration received or receivable on or after 1 August 2024?

  • A. The six per cent levy on consideration for online advertisement services
  • B. The two per cent levy on consideration for e-commerce supply or services
  • C. The levy on consideration for provision of digital advertising space by non-residents
  • D. The taxation of business income attributable to significant economic presence in India

Q7. The terms of reference for a United Nations Framework Convention on International Tax Cooperation were adopted in August 2024 by which one of the following bodies?

  • A. The Committee of Experts on International Cooperation in Tax Matters
  • B. The Financing for Development Forum of the Economic and Social Council
  • C. The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting
  • D. The Ad Hoc Intergovernmental Committee established by the General Assembly

Q8. Consider the following statements regarding the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation: 1. Its Fourth Session met at United Nations Headquarters, New York, in February 2026. 2. It is mandated to submit the final texts of the framework convention and its early protocols to the General Assembly in 2029. 3. At its Fifth Session, held in August 2026, Member States engaged for the first time with concrete draft text across all its workstreams. Which of the statements given above is/are correct?

  1. Its Fourth Session met at United Nations Headquarters, New York, in February 2026.
  2. It is mandated to submit the final texts of the framework convention and its early protocols to the General Assembly in 2029.
  3. At its Fifth Session, held in August 2026, Member States engaged for the first time with concrete draft text across all its workstreams.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q9. Which one of the following is the overarching theme adopted by India for its BRICS Chairship in 2026?

  • A. Quality Statistics as Driver of Change
  • B. Strengthening Cooperation for Equitable Global Development
  • C. Building for Resilience, Innovation, Cooperation and Sustainability
  • D. Partnership for Inclusive Growth and Shared Prosperity

Q10. Consider the following statements regarding tax cooperation under India's BRICS Chairship: 1. Decisions taken at the meeting of BRICS heads of tax authorities are binding on all member tax administrations and override their domestic transfer pricing rules. 2. The working groups proposed by India on International Taxation and Transfer Pricing, and on Revenue Statistics, are conceived as standing platforms intended to continue beyond India's chairship year. 3. The capacity-building workshop for BRICS Young Tax Professionals held at the National Academy of Direct Taxes, Nagpur, covered the OECD and UN Model Conventions as well as dispute resolution through advance pricing agreements and the mutual agreement procedure. Which of the statements given above is/are correct?

  1. Decisions taken at the meeting of BRICS heads of tax authorities are binding on all member tax administrations and override their domestic transfer pricing rules.
  2. The working groups proposed by India on International Taxation and Transfer Pricing, and on Revenue Statistics, are conceived as standing platforms intended to continue beyond India's chairship year.
  3. The capacity-building workshop for BRICS Young Tax Professionals held at the National Academy of Direct Taxes, Nagpur, covered the OECD and UN Model Conventions as well as dispute resolution through advance pricing agreements and the mutual agreement procedure.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q11. Short-term liquidity support under the BRICS Contingent Reserve Arrangement is operationalised through which one of the following?

  • A. Concessional balance-of-payments lending windows opened by the New Development Bank
  • B. A pooled reserve fund administered by the BRICS Interbank Cooperation Mechanism
  • C. Standby credit lines extended by the finance ministries of the member countries
  • D. Currency swaps among the central banks of the member countries

Q12. Consider the following statements comparing the United Nations Model Double Taxation Convention with the OECD Model Tax Convention: 1. The UN Model generally preserves a greater share of taxing rights for the State of source, whereas the OECD Model preserves a greater share for the State of residence. 2. A particular aim of the UN Model is to facilitate the conclusion of bilateral tax treaties by developing countries in support of their development goals. 3. A recent revision of the UN Model introduced mandatory binding arbitration for cases that cannot be resolved under the mutual agreement procedure. Which of the statements given above are correct?

  1. The UN Model generally preserves a greater share of taxing rights for the State of source, whereas the OECD Model preserves a greater share for the State of residence.
  2. A particular aim of the UN Model is to facilitate the conclusion of bilateral tax treaties by developing countries in support of their development goals.
  3. A recent revision of the UN Model introduced mandatory binding arbitration for cases that cannot be resolved under the mutual agreement procedure.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3