Business International Ltd. (BI) is a multinational Group with interests in multiple businesses. The consolidated group revenue of BI Group is more than ₹1000 Crores. A-XI Ltd., an Indian company successfully bid for Indian Cricket League (ICL). A-XI Ltd. is a part of the BI Group. The company selected 15 players cricket team. As per ICL mandate, the team composition would be mixed Indian and Foreign players. A-XI Ltd. selected foreign players from South Africa, Australia, Kenya and Bangladesh. A-XI Ltd. has to pay franchisee fees $ 10 MN to International Cricket Control Board (ICCB). As per the agreement, A-XI Ltd. will get share of 5% in revenue generated through selling of match telecast right and 5% revenue for the sale of tickets. The worldwide telecast rights for the event have been awarded to Sumito Satellite, Japan. For the promotion of the team, A-XI Ltd. hired David Bothom, Ex-Australian Cricketer. A-XI Ltd. also entered into an agreement with Albert Advertising, a Singapore company for online advertisement of match promos. All the foreign players will get $1MN as match fees. More details about each of the parties with whom A-XI Ltd. transacts and details of the transactions are as under: 1. **Peter, Player from South Africa.** In the financial year 2021-22, Peter was in India for a test series for 60 days and after 20 days rest period in India, he played ICL for another 60 days. His income from India is as below: ParticularsAmountRemarks Test match fee$ 0.5 MN ICL Match Fees$ 1.0 MN Advertisement for an automobile company headquartered in US$0.25 MNThe shooting was held in India. The payer company is from US. Article writing fee (Articles on ICL)$ 0.10 MNThe article was published in newspaper widely circulated in India. Participation fees charged in live TV show in India.$ 0.25 MN Article writing fee for an online platform. (Articles on Motivation etc. of Sportsmen)$ 0.25 MNPublished in leading sports portal accessible worldwide. Auction of his Cricket bat$1.00 MNWhich is donated to a, charitable Institution in India (approved under section 80G). 2. **Shiv Paul, Player from Kenya.** He was in India in FY 2021-22 for 90 days only. His father was citizen of India, settled in Kenya. His father has a residential house in Jaipur (Rajasthan) which is rented to an Individual and the monthly rental income ₹ 2 lakhs. Rent is paid by the tenant to a Private Trust created by his father where Shiv Paul is the sole beneficiary, and the trust is registered in Cayman Island. The private trust is non-discretionary, specific, irrevocable trust. The bank account of the trust is in Kenya and rent is remitted to Kenya Bank Account. Apart from ICL match fees, he also participated in advertisement of fashion wear and income from such advertisement shoot is ₹ 10 lakhs. 3. **Albert Advertising, Singapore.** Albert Advertising is a company based in Singapore and Sumito Satellite, a company based in Japan, is one of the largest shareholders with 40% of the shares being held by them. A-XI Ltd. also holds 65% equity in Sumito Satellite. Mr. Raghvendra is CEO of Albert Advertising, and he is also Director (Marketing) of A-XI Ltd. The total contract value of A-XI Ltd. and Albert Advertising is for $ 50 MN and the entire amount has been paid in advance by A-XI Ltd. Albert Advertising has entered into similar type of agreement with other companies. The contract values are an average of about $ 45 MN. In those later agreements, the terms are different and importantly, the companies are permitted to pay the fees over a 3 month period. Mr. Raghvendra does not hold any equity in A-XI Ltd. A-XI Ltd. has given the corporate guarantee to Singapore Bank for a loan of $ 2 Million obtained by Albert Advertising. Albert Advertising's total borrowings are about $ 30 million. 4. **Raghavendra, CEO of Albert Advertising** Raghavendra is the CEO of Albert Advertising since January 2019. He has been a part of the senior management of the BI Group for many decades. Raghavendra was with Sumito Satellite Japan as Manager marketing from January 2008 to December 2014. He relocated to India in January 2015 accepting the role of Director Marketing at A-XI Ltd. He was in India from January 2015 to December 2018 and relocated to Singapore from 2019. He has been a non-resident since P.Y. 2019-2020. In March 2022, the income tax department came to know of a residential property acquired by Raghavendra in Japan in 2016. A notice under section 10 of the Black Money Act, 2015 has been issued. Raghavendra says he bought the house for $ 5,00,000 in 2016. The fair value of the house as determined valuer recognised by the Govt of Japan as on 31st March, 2022 is $ 1.5 million. 5. **Sumito Satellite, Japan** The company got the live telecast right of ICL matches and the contract value is $ 200 Mn. The said amount is payable to ICCB. Sumito Satellite expects to earn about $ 400 Mn by selling timeslot for advertisement during the tournament. To carry on the activities in India, the company has set up a project office in Delhi. The Company has deputed two technicians, who would be staying in India for a total period of 100 days to manage uninterrupted relay of live telecast of ICL matches. The salary of technician A and Technician B would be $ 5000 per month. Since Sumito Satellite needs more staff; they propose to hire some staff from A-XI Ltd. who will work under the supervision of technician A and B. For hiring of staff from A-XI Ltd., Sumito Satellite would pay $ 1 Lakh. 6. **David Bothom, Ex Australian Cricketer.** He is resident of Australia, stayed in India in the P.Y.2021-22 for 65 days, he will get ₹25 lakhs for promotion of matches. Apart from this, he wrote some article in newspaper and his fees for writing articles is ₹ 5 lakh and he has also become the visiting faculty for coaching in Indian Cricket Academy and his fees for the same is ₹ 10 lakh. Choose the correct alternative for the following MCQs: (5 x 2 = 10 Marks) You are required to answer the following issues:
Sub-questions (8)
What is the due date for filing Country by country reporting by A-XI Ltd.?
(A) On or before the due date of furnishing the return of income.
(B) One month before the specified date of filing of Income tax return.
(C) Within the end of twelve months from the end of the accounting period of the reporting entity.
(D) On or before the end 30th November of the Assessment year.
Is the tenant of the Jaipur house required to deduct tax at source while remitting the rent, if the rent is taxable in India?
(A) No, because individual assessee is not required to deduct TDS unless the Turnover in the preceding years from business exceeds ₹1 Crore.
(B) No, because the house is being used for residential purpose and not for business purpose.
(C) Yes, because TDS is applicable while making payment to Non-resident and the sum is chargeable to tax in India.
(D) Yes, because the rent payment is more than 2.40 lakhs.
Raghavendra wants to argue that the notice issued to him under section 10 of the Black Money Act, 2015 is invalid since he is a non-resident in 2021-2022 and that he had acquired the property out of his tax paid income in Japan while he was a non-resident. What would you advise?
(A) The notice is invalid since he is a non-resident in the year of issue of notice.
(B) The notice is invalid since the assets have been acquired out of income earned while he was a non-resident.
(C) The notice is valid since the property was acquired in the year when he was a resident.
(D) The notice is valid even if he was a non-resident in all the years in question.
As a Transfer Pricing consultant, please advise whether A-XI Ltd. and Albert Advertising is Associated Enterprise or not?
(A) Yes, because one enterprise participates directly in the shares carrying not less than twenty six percent of the voting power in the other enterprise.
(B) Yes, because one enterprise participates indirectly in the shares carrying not less than twenty six percent of the voting power in the other enterprise.
(C) Yes, because Mr. Raghvendra is the common director in both the companies.
(D) Yes, because one enterprise guarantees loan exceeding the prescribed percent of the total borrowings of the other enterprise.
Whether employees of Sumito Satellite will create Permanent Establishment in India?
(A) Yes, because employees stay in India is more than ninety days.
(B) No, because project does not last more than six months.
(C) No, because PE cannot be created because of the stay of employees in India.
(D) Yes, because the foreign company has a project office in India.
Give a brief note on the taxability of each source of income of Peter, the South African player. (Assume exchange rate for computing income to be 1 USD = 75 INR)
If the house property in Japan is held to be an undisclosed foreign asset under the Black Money Act, what is the maximum tax and interest liability that Raghavendra could have? You need not comment on other penal implications. (Assume exchange rate for computing income to be 1 USD = 75 INR)
Give a brief note on the total income and tax liability of Shiv Paul, Kenya Player. Whether your answer would be different if there is no trust, and the payment of rent is made directly to the account of Shiv Paul outside India?