[Taxation] Advance Pricing Agreement, Arm’s Length, Vodafone Transfer Pricing, DTC, GAAR, Advance Tax ruling explained

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Mitrapal Philosophy
  1. Prologue
  2. Capital Gains Tax (CGT)
    1. CGT & Withholding norms (TDS)
    2. Vodafone CGT
    3. IT Act 1961: Clarification (2012)
  3. Direct Tax Code (DTC)
    1. DTC and Indirect transfers
    2. Direct taxes: DTC vs. Budget-2014
  4. Tax Avoidance and GAAR
    1. What is GAAR?
    2. Shome Panel on GAAR
  5. What is Transfer Pricing?
    1. Vodafone Transfer Pricing Issue
    2. Budget 2014: transfer pricing reforms
    3. What is Advance Pricing Agreement?
    4. Roll back provision
  6. What is Arm’s Length Price?
  7. Advance ruling
    1. Authority for Advance Ruling (AAR)
    2. Other Tax reform bodies under Budget 2014
  8. Appendix
    1. A1: CGT: Short term vs Long term
    2. A2: What happened to Vodafone case?


Sidenote: Madhya Pradesh MPPSC prelim hallticket uploaded click me.

After Budget 2014, six terms in news:

  1. Transfer Pricing
  2. Advanced Pricing agreements (APA), roll back provision
  3. Arm’s length price
  4. Advance Tax Ruling
  5. Direct tax code
  6. GAAR, Shome Panel

All of them aim to reduce tax litigation, have direct-indirect connection with Vodafone case. So let’s refresh those old concepts.

What is Capital Gains Tax (CGT)?

  • is a direct tax
  • Levied on profit, when you sell capital assets (shares, gold etc)
  • Matter falls under IT department, because it’s a direct tax.
Capital gains Tax Application:
applies todoesn’t apply to
  1. shares, bonds, Mutual fund etc. financial assets
  2. land, house, office, building, factory, machinery
  3. gold, diamond, jewelry, precious stones and metals.
  4. archaeological collection, drawings, paintings, sculptures etc.
  1. Agricultural land
  2. Personal articles such as furniture, cloths, belt, shoes, wallet etc.

More given in the appendix, about short term vs long term CGT.

CGT & Withholding norms (TDS)

1 Witholding Tax TDS in Capital Gains tax

  • Assume Kishor Biyani wants to sell Pantaloon company to Kumar Mangalam Birla at profit of 1000 crore and has to pay 100 crore CGT to income tax department.
  • In real life, seller (Kishor) himself doesn’t need to pay 100 Crore CGT to Government.
  • Buyer (Birla) will have to keep aside 100 crore for government, and pay only 1000-100=900 crores to Biyani. Observe following photo

This is called withholding norms or Tax deduction at source (TDS).

Question: If income tax department doesn’t get the tax, then whom should they send notice- Buyer or Seller?

Ans. Buyer. Birla in Pantaloon deal and Vodafone in Hutch deal.

Vodafone CGT

2 Vodafone Hutch deal Capital Gain Tax Cayman Islands

  • Hutchison (Hongkong) own a company called CGP investment Holding ltd, (Cayman Island)
  • CGP owns 67% shares of Hutch-Essar India.
  • Vodafone (HQ London), tells its subsidiary in Netherland, to purchase Cayman Island Company from Hutch (Hongkong) for the price of 11 billion dollars (~55k crore rupee that time)
  • Now Vodafone owns CGP, therefore, and thus indirectly owns Hutch-Essar India also. Because CGP owned 67% shares of Hutch Essar India.

Ok so what’s happening?

  • A buyer (Vodafone) has (indirectly) purchased shares (of an Indian company) from a seller (Hutch).
  • So, does Buyer (Vodafone) have to pay Capital Gains Tax, in India?
CGT applies or not?
Vodafone’s versionIncome Tax Department says
  • We’ve not purchased “Hutch Essar”, we purchased CGP.
  • CGP is not an Indian company, so you cannot demand any tax from us.
  • CGP is a post box company in a tax haven. It doesn’t produce any mobile phones or desi-liquor bottles, then why have you given 55k crores for it?
  • Obviously, to control those 67% shares in Hutch-Essar India!
  • therefore, CGP’s valuation is based on an Indian asset (shares of Hutch-Essar)
  • Therefore, we can, and we will demand capital gains tax.

Matter goes to Income tax Appellate tribunal (ITAT) and then to court:

Taarikh Pe Taarikh
Yearcourt judgment
  • Bombay Highcourt says government right, Vodafone wrong.
  • orders Vodafone to pay the taxes
  • Supreme Court says government wrong, Vodafone right.
  • Under the current Income Tax act 1961, Income tax Department has NO jurisdiction in this matter, when companies trading assets outside India (CGP ltd in Cayman Islands).

Then Finance Minister Pranab doesn’t like it. Not one bit. So, he issues a clarification in IT act.

IT Act 1961: Clarification (2012)

  • We can demand Capital gains Tax, when a foreign company is sold. IF that foreign company’s value is derived from Indian Assets. (e.g. CGP valued at 55k crore, because it owned HutchEssar India’s shares).
  • Then, for tax purpose, we’ll consider them Indian companies, and demand capital gains tax.
  • This provision will apply to all deals from 1962 onwards (hence called “Retrospective”.)

So, even after winning case in Supreme court, Vodafone’ trouble did not end.

Income tax department again sends notice for the same Capital gains tax.

Direct Tax Code (DTC)

Direct Tax Code aims to replace the Income Tax Act of 1961

Timeline of Direct Tax Code
2010DTC Bill introduced. Sent to Parliament’s standing Committee on Finance. Committee proposed changed.
2014, MarchChindu uploads revised (draft) Direct Tax Code 2013 on Finance ministry website, to seek juntaa’s opinion on it.
2014, MayDirect Tax bill lapses with “THE END” of 15th Lok Sabha.

Then, should we prepare DTC for exams?

Yes, because

  1. Economic survey 2013: recommended implementing DTC.
  2. Budget 2014: Jaitley said “we’ll implement DTC, after reviewing juntaa’s comments and consulting with experts.”

DTC and Indirect transfers

DTC aims to fix discrepancies in Income Tax Act, so that Vodafone like cases, do not happen again. Under DTC:

  • “Indirect (asset) transfers” will be taxed in India, IF the companies involved, have at least 50 percent of their assets located in India.
  • For example, Vodafone bought CGP investment ltd for ~55k crore rupees, because CGP owned 67% shares of Hutch-Essar India.
  • Therefore, income tax department can demand Capital gains tax from Vodafone. (recall: Buyer pays CGT)

Limitation: what if they create three separate post box companies each owning 30-30-30%!

DTC also provided tax on “software Royalties” (with respect to that Nokia case click me)

Direct taxes: DTC vs. Budget-2014

Comparision: Budget provisions vs DTC proposals
taxable incomeBudget 2014DTC proposed
2.5 lakh to 5 lakh102 lakh to 5 lakh slab: 10%
>5 lakh-upto 10 lakh2020%
>10 lakh3030%
>10 crore35%
dividend >1 crore additional 10%
1% Wealth Tax,For assets above 30 lakhsYes, but only on physical assets.Wealth tax on both:

  1. physical assets (gold, real estate etc)
  2. financial assets (shares, bonds, MF etc)
  • DTC also provide plus higher slabs to senior citizens, and many other technical reforms.
  • More on budget 2014’s direct-indirect taxes in separate articles. So far we’ve learned; what is CGT, How Vodafone avoided CGT, What’s the provisions in DTC to prevent such cases in future?

Moving to next topic

Tax Avoidance and GAAR

What’s the difference?
Tax EvasionTax Avoidance
Income, sell-purchase is hidden from tax authorities.all deals open- mentioned in their account books and shareholder meetings.
Example: builder sells a property for 10 lakh, but accept only 1 lakh via cheque, remaining 9 lakh via cash. (to evade stamp duty).Example: this Vodafone case. They purchased an Indian company (Hutch-Essar) via purchasing an intermediary company (CGP) in a tax haven.
Income tax act already has clear cut penalties for this.
  • Income tax Act has grey areas, loopholes for this.
  • Recall Supreme court ruled in favor of Vodafone because matter outside IT dept’s jurisdiction.

Vodafone isn’t the only company that has avoided tax.

More cases of (alleged) Tax Avoidance
MNC giantBought Indian CompanyVia intermediary in
VodafoneHutch EssayCayman Island
Sanofi AventisShantha biotechFrench
General ElectricGenPact India.Luxemburg
VedantaSesa GoaCyprus
  • Like ^this, MNC giants have avoided ~40,000 crore rupees of capital gains Tax from India. This money could have been used for financing fiscal deficit, inflation control, and Sarkaari schemes!
  • Therefore, Government decided to make new rules to stop this menace.

And, thus we come to next topic:

What is GAAR?

  • General Anti Avoidance Rules.
  • Originally mentioned in Budget 2012. They were to be implemented from 1/4/2014.
  • IT commissioner take action against business deal made outside India, to avoid taxes.
  • He can send notice to Indian Citizen, NRI, Foreigners, to recover such money:
    • Even if they’re living outside India.
    • Even for retrospective deals i.e. deals happened before GAAR was implemented
    • Even if deals protected under any Double taxation avoidance agreement treaty.
  • Burden of proof lies with the party and not IT commissioner i.e. Company has to explain their deal is genuine.
  • IT commissioner has to decide the case within 12 months. Aggrieved party can approach Dispute resolution Panel (DRP) => Income Tax Appellate Tribunal (ITAT) => HC and finally Supreme Court.
  • GAAR not a completely new invention. China, Australia, Canada, New Zealand, Germany, France, S.America etc already have similar concepts.

Obviously MNCs wouldn’t like it. Not one bit. They lobbied hard, finally government setup a panel under Parthsarthi Shome Panel to review the GAAR rules.

Shome Panel on GAAR

Recommended following:

  1. IT commissioner should send notices only in rare cases- where he can recover more than 3 crore rupees.
  2. GAAR should not be used for filling revenue shortfalls. Revenue shortfall occurs when government’s revenue collection is less than expected because of inflation, policy paralysis, global slowdown etc. So in such cases, GAAR should not be used for extracting more money from corporates to finance Bogus Sarkaari schemes.
  3. For retrospective cases- only recover tax dues. Don’t demand additional penalty and interest rate on such retrospective cases.
  4. Exempt the buying/selling of company shares from Capital gains tax. Better just increase the Securities Transaction Tax (STT) on buying/selling of such shares. Then, there is no litigation about “CGT evasion via post box company”. Problem permanently solved.
  5. Don’t implement GAAR from 2014. Implement it from April 2016.

For more GAAR features, pro and anti arguments click me

3 Parthsarathi Shome panel on GAAR

What would General Dong (Amrish Puri) sing for this gentleman?

What happened after Shome?
Budget 2013Chindu says we’ll implement GAAR from 1/4/2016
Sept 2013Chindu says following

  • GAAR notices only for deals after 31st august 2010
  • GAAR notices, only if benefit more than 3 crores.
  • GAAR will be effective from 1st April 2015
  • IT officials will have to first send show cause notice and person will be given opportunity to present his side.
Budget 2014Jaitley silent on GAAR
Nirmala Sitharaman
  • Minister of State for Finance.
  • After budget, she replied in parliament, “GAAR will be applicable from 1st April 2015.”
  • Investors get scared, BSE-SENSEX collapses by ~350 points.
Shaktikanta Das
  • Revenue Secretary
  • To calm down the market, he said “please donot interpreted that GAAR will be implemented from 1st April 2015. New government yet to look at the issue in detail!”

So far, we learned

  1. CGT, Vodafone Hutch deal.
  2. DTC, GAAR to prevent Vodafone like cases in future.

Now next two topics: Transfer pricing and advance ruling. These are also in context of Vodafone

What is Transfer Pricing?

Recall the original concept of CGT & TDS:

  • When a capital asset (shares) are transferred from seller (Kishor Biyani) to Buyer (K.M.Birla) => then Buyer has to withhold / deduct the capital gains tax for government.
  • Biyani and Birla are two unique businessmen / promoters. So, when share transferred from one person to another, we can hope the share price are decided by market forces of supply, demand and speculation.
  • BUT WHAT IF two subsidiary companies transfer shares to each other, and play mischief.

Vodafone Transfer Pricing Issue

Vodafone London has two subsidiaries:

  1. Mauritius: Vodafone Teleservices India Holding Mauritius.
  2. India: (Call center) Vodafone India Services (VISPL)

5 Vodafone Transfer Pricing

Two version
What Vodafone says?What IT Dept. says
  • 2008: Indian arm sells its shares to Mauritius for ~Rs. 250 crores
  • Mauritius arm says we bought shares to infuse new capital in the Indian arm.
  • Real Market price of those shares = ~1550 crores.
  • Vodafone’s Indian arm deliberately sold its shares at a lower price of ~250 cr. (undervaluation of ~1300 crore.)
  • This is one type of hidden loan or secret profit transfer from Indian arm to Mauritius arm.
  • HOW? Well Mauritius arm could sell those shares again to a third party at market price and make profit.
  • So in a way, Mauritius will make “GAINS” (in future), and we want capital GAINS Tax on it!
  • Thus CGT + penalty + interest = ~Rs.3700 demanded.

In short,

  1. Vodafone transferred its call centre shares from India to Mauritius at an undervalued price
  2. this was one type of hidden loan / secret transfer of profit.
  3. IT dept wants capital gains tax on this.

That’s the Vodafone Transfer Pricing issue. Case pending in Income Tax Appellate Tribunal (ITAT).

Shell India, also caught in similar controversy.

Budget 2014: transfer pricing reforms

Jaitley made new reforms in Budget 2014, to reduce the transfer pricing related litigations, and enhance MNC confidence to invest in India.

What is Advance Pricing Agreement?

Advance pricing agreement (APA) is an agreement between:

  1. Tax payer (Vodafone)
  2. Tax authority (IT department)

For deciding transfer price OR arm’s length price in advance.

For example:

Vodafone CEO
  • Hello IT commissioner sir, I wish to transfer ___ no. of shares of Indian call centre to Mauritius arm @___ Rs. per share on ___ date.
  • We’ve decided this transfer price, by taking “arithmetic mean” of share prices at BSE for last one year.
  • So, are you “OK” with this pricing (and the consequent tax)?
IT CommissionerYes, but Only if __ bottles of desi liquor are provided to our staff.
Vodafone CEOBut I’m a foreigner, I do not know any local dens! I can get you finest Vodka, Cognac and Champaign!
IT commissionerThat’s not my problem. We only prefer Swadeshi. IF you want to operate in India, then you have to respect our culture (GS1) and tradition.

Enough cheap jokes back to topic:

  • APA concept introduced in Income Tax Act from 2012.
  • Ok then what is Jaitley’s innovation in 2014?

Roll back provision

Means, If Vodafone and IT Dept. sign an APA agreement right now, its (share pricing) methodology can be applied for solving pending cases upto last four years.

APA: Rollback
beforeafter budget 2014
Only previous one year’s data could be used for deciding the price.Jailed permitted use of multi-year data for better comparative analysis. (so that pending litigations upto last 4 years can be decided)

on a related topic:

What is Arm’s Length Price?

  • Arm’s length price, is the price at which two unrelated parties will make a deal. (Say Kishor selling shares to Birla at 1000 crores).
  • Since these two parties are unrelated, hence market forces of supply-demand will work, the (share) price will be rational.
  • So, government will get the full tax it deserves.


  • When MNC giant’s one subsidiary company makes deal with another subsidiary company- they’re related with each other (because main boss is the MNC).
  • In this case, deal pricing may not be rational.
  • Government may not get full tax it deserves.

Therefore, government wants to ensure that following two prices are same. For example:

Inter-company price / Transfer priceArm’s length price
when Vodafone’s Mauritius arm sells its Indian call centre shares to Vodafone’s Netherlands armPrice at which Kishore would trade his Vodafone callcentre shares with Birla?

Let’s try a Mains questions:

Q. Discuss advance pricing agreements, and their role in promoting foreign investment in India. (200 words)

  1. When two subsidiary companies of the same MNC giant, make a deal, there are chances of price manipulation to reduce tax liability, as it allegedly happened when Vodafone’s Indian arm transferred the shares to Mauritius arm. Resulting into a lengthy litigation between Vodafone and Income tax department of India.
  2. 2012: Government provided for advance pricing agreement in Income tax Act.
  3. APA is an agreement between tax payers and tax authorities.
  4. It validates the transfer pricing between two interrelated companies and ensures that it is equivalent to an arm’s length price.
  5. 2014: Government further reformed APA system, to provide “roll back“ in APA agreements. Now APA agreements can sort out pending litigations up to past four years using multi-year data analysis for share pricing.
  6. Thus, APA is a win-win situation for both parties- tax authorities get their legitimate dues and companies become immune to future litigations. This clarity and continuity in tax policies will aid in bringing more foreign investment in India.

(~170 words)

Advance Tax ruling

  • Jaitley also discussed this in budget-2014.
  • This topic not directly related to Vodafone.
  • But it’s easy to make silly mistakes between APA vs advance ruling. so let’s check it out:

What is Advance Tax Ruling?

  • Suppose a foreign company enters India via Joint Venture / Subsidiary / etc.
  • But India has a complex tax structure, the foreign company may need clarification in advance, on the Taxes that may apply to its business.

To help foreign companies, Government setup a body called….

Authority for Advance Ruling (AAR)

  • It’s a statutory body Under IT Act. Started from 1993.
  • composition: Retired SC judge and two government officials (of Addl.Secretary rank)
  • Foreign company can file application to AAR, to seek clarification on its tax liabilities.(Fees: 2500 rupees.)
  • Timeframe: AAR has to reply within 6 months.
  • AAR ruling binding on both company (Tax payer) and Income tax department. IT officials cannot send notices/raids if AAR already rules in advance that xyz matter is exempted. (Although IT officials can approach HC and SC to challange AAR rulings)
  • Thus, AAR provides clarity on tax structure in India. Promotes “Ease of Doing business”.
  • Speedy decisions, Avoids lengthy court litigations.

Ok then what’s new?

Reform: Advance Ruling
BEFOREAfter budget 2014
only (nonresident) Foreign companies could approach AAR to seek coaching clarification.Even Indian companies can approach AAR.

Other Tax reform bodies under Budget 2014

Committee 4 Tax clarityHigh level Committee under CBDT
  • High Level Committee to interact with trade and industry on a regular basis.
  • to find out which tax laws require further clarification.
  • Based on the recommendations of the Committee, CBDT and CBEC shall issue appropriate clarifications. Timeframe: within 2 months.
  • before IT officials launch any fresh cases for retrospective tax demands, they’ll have to seek permission from this Committee.
  • Apart from this, Economic Survey and Jaitley mentioned many bodies such as productivity commission, Expenditure Management commission etc. But we’ll see them in future articles because they’re not directly related with tax litigations like Vodafone.
  • More than 4 lakh crore worth tax money cases stuck in litigations. In this article, my purpose was to cover the bodies/reform that’ll aid in that regard.


Some side topics:

A1: CGT: Short term vs Long term

How much CGT do you have to pay? That depends on “Duration”.

conditionCGT rate
Suppose I bought a gold-bar, diamond, house, Picasso’s painting or DEBT-mutual fund today, and sell It in less than three years (with profit)
  • Short term capital gains tax.
  • it is added to your “income”
  • So then tax depending on income tax slab (10, 20, 30%)
same case, but I sell after three years (with profit)Long term capital gains tax (20%)
  • Meaning, two CGT rates depend on duration for which, you own the asset.
  • But there is slight change, if you buy/sell shares and (Equity) mutual funds:
within 1 yearafter 1 year
CGT: 15%exempted

Side note:

  • Equity mutual funds: people pool their money, and mutual fund manager invests it in shares.
  • Debt mutual funds: people poor their money, and mutual fund manager invests it in bonds.

Q. Does 3% education cess apply?

Yes education cess applies.

A2: What happened to Vodafone case?

So far Vodafone is caught up in two cases

Hutch Essar CGTTransfer pricing of call centre
  • Government demanding ~20k crore in CGT+interest+ penalty
  • SC ruled in favor of Vodafone but Government brought clarification in IT act, to give retrospective notice.
  • Government demanding ~3700 crore rupees
  • In Dec 2013, ITAT gave stay order for six months.
  • In August 2013, Chindu offered “Conciliation” (e.g no need to pay 20k crore, just pay ___ crore in ___ installments, and IT dept will free you from this case.)
  • Initially Vodafone agreed, but then demanded conciliation “Discount” for both Hutch case + call centre transfer pricing case.
  • we can give you discount for Hutch case (because SC in your favor),
  • But in the transfer pricing case – we’ll not give you any discount, because you’re completely at fault.
VodafoneThen I want both dispute to be settled outside India, under UNICITRAL law.
ChinduSorry, can’t accept. (thus, conciliation talks collapsed)
VodafoneThen I want this dispute be handled under India-Netherlands Bilateral Investment Protection and Promotion Agreement. (BIPA)
ChinduThat agreement will not protect you on that call centre case. You’ve deliberately undervalued share prices.
VodafoneOnly time will tell.
  • April 2014: Vodafone Sends notice to government in April, 2014, wanting the case handled by an International arbitrator at London, as per the provisions of Netherland BIPA.
  • June 2014: Government appointed former Chief Justice of India R. C. Lahoti as arbitrator. He’ll look only at Hutch CGT case. And NOT at the call centre transfer pricing (Because that matter still pending.)

I’ll set Mock MCQS later. My first priority is to cover the “Content” of budget + economic Survey.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
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  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha

391 Comments on “[Taxation] Advance Pricing Agreement, Arm’s Length, Vodafone Transfer Pricing, DTC, GAAR, Advance Tax ruling explained”

  1. sorry but in formula there should 40%(CSAT) and 60%(GS) and overall outcome will be 30%(CSAT) and 30%(GS) as per score of i suggested.

  2. This was Posted on the Face book page,”Rashtriya adhikar manch” I am just copy pasting this here….

    एक मित्र आनंद गौतम ने हमसे फेसबुक पर साझा की:

    This report came in public domain by CIC order.Some findings of.Nigvekar- (Chapter 3, Page46-49)
    1.CSAT structure is not proper because
    humanities stream students cannot perform better in this system.Only one cluster of science stream (=Engineers)
    enters the mains exam in this structure.CSAT Paper II has raised doubts about the competence of non-math background and non-English background candidate in taking this exam successfully. Since contents of CSAT paper is not a part of general (humanities)
    curriculum, it has given edge to science background candidates.

    2.CSAT paper- II favors Urban English medium candidates and it is hurting rural candidates.

    3.Candidates with poor command over general studies are qualifying because of their good command over aptitude. (Since
    even the best candidates in general studies, cannot score beyond a point in GS paper- given its toughness). Thus, graduates from non-science/ engg background are hurt in the competition

    4.Hindi translation is very mechanical.It should be more logical to give complete meaning of full sentence.(page- 49).

    5.The CSAT Paper-I (General studies) is difficult compared to paper-II (Aptitudetest). The candidates who are good in general studies, are at disadvantage, because they can’t get any edge with
    general studies.

    6.On the other side, candidates good in paper-II(Aptitu de) gets advantage, & they can make though the exam even without much study of general studies. Aspirants with Engineering background formed the major chunk of aspirants who qualified the prelims in the first attempt. (Ref. Chapter 3, Page54) Annex-1, Page 151

    7.The Preliminary Examination pattern introduced from CSE, 2011 seems to be skewed in favour of candidates from science background. Our endeavour should be to provide level playing field. There should be equal weightage in all the sub-sections

    1. साभार – एक मित्र किशोर चन्द्र जी की वाल से देखिये मित्र UPSC की एक और बानगी। ……। कल cpf की परीक्षा थी जो upsc आयोजित करती है …इंग्लिश वाले प्रश्नपत्र में प्रश्न संख्या १ [c] में पूछा गया प्रश्न ..Mass transport systems are the key to reducing fuel expenditure….इस बिषय के ऊपर निबंध लिखना था …upsc ने इसका हिंदी अनुवाद किया जो इस प्रकार है – इंधन खर्च को कम करने व पर्यावरण के सुधार के लिए जन परिवहन तंत्र मूल आवश्यकता है ..आप बताये की इसमें पर्यावरण कहा से आ गया जबकि इंग्लिश में environment है ही नहीं ……धन्यवाद

      1. Friends the main issue is about translation…. hindi translation is either wrong or very tough level hindi… so ppl tend to mark wrong answers and loose the race.. since upsc considers the english language qts for declaring the answer key…. in Mrunal Bhais… toppers interview haven’t u seen that most ppl from IIT, IIM , Sci, technocrats, management.. guys say.. ” I hv not prepared for paper 2 csat.”. and see their marks … 170… 180…. how can a candidate from humanities background compete them… & since they are out of the race at the pre level… can’t appear for mains…. upsc should be a level playing field… no discrimination equality for all…. and in my opinion… for doing good for the nation n its ppl… we dnt need this csat… hist.. geog.. eco… etc etc.. bcoz… our education system dosen’t create a good person…. because the goal of education is to instill concepts and character building, not just examination and indoctrination wat our system is lacking.. collector banke accha kaam karne acchi niyat honi chahiye… agar acchi niyat nahi hai toh kahi par bhi jayenge… galat kaam hi karenge….. & i feel this all study… exam… etc is for elimination… since lakhs of ppl apply for a few thousand or for that matter a few hundred jobs… so wat else the govt. will do !!!!

  3. Friends please read this…..


    WHO ARE WE? We are those lakhs of IAS aspirants who have been victimized by the irrational and non-inclusive age relaxations allotted by the previous government. We have full faith on the new government and we firmly believe that it will impart justice to us by making the age relaxations fair and inclusive.In this memorandum, we have explained our case in details.

    WHAT DO WE WANT? On 4th March 2014,a notification came on the DOPT (Department of Personnel and Training) website which clarified the so-called consequential(!) age relaxations for different categories of IAS aspirants, to be effective from CSE(Civil Services Examination) 2014 onwards.It had already announced 2 additional attempts w.e.f. CSE 2014 for all categories of candidates on 10th February, 2014.On that date the government did not make the age relaxations clear.It only announced that consequential (!) age relaxations will be given, if required.On 4th March , the DOPT explained this consequential(!) age relaxations in its notification . According to the notification of the DOPT, the maximum age limit for various categories of candidates w.e.f.CSE 2014 will be as follows:-GEN- 32, OBC-35,SC/ST-37, PH-42, etc.Further, when the UPSC(Union Public Service Commission)published the notification for CSE 2014 dated 31st May, 2014 it was clear that it has followed this ill-framed policy of the previous government.

    Our requests are very plain and simple. These are:-

    (1) We want the DOPT to initiate an age relaxation of 6 years to all candidates irrespective of any category from CSE 2014 onwards.Thus, after the fulfillment of our request , the maximum age limit of different categories of IAS aspirants will be:-GEN-36,OBC-39,SC/ST-41,PH-46,etc.

    (2) We want the DOPT to make CSAT (Paper II of CSE Preliminary) qualifying.


    (A) BACKGROUND First and foremost, it is imperative to note that in the span of the past few years,DOPT and UPSC have relentlessly embarked upon a path of drastic transition in the pattern and structure of CSE.This started off when negative marking was introduced in the Preliminary Examination since CSE 2007 onwards.This negative marking , moreover, has been fixed at a steep 33.3% for each wrong answer instead of the average 0.25% in other examinations.This is putting the candidates at a great disadvantage.

    (B) CHANGE IN THE SYLLABUS In CSE 2008, modifications were carried out in the MAINS syllabus of the Optional subjects to the extent of 50%-75%, hampering the preparation of deserving aspirants and thus, their chances of success. But, worse was yet to come!Drastic changes were introduced in the CSE syllabus in 2011 and 2013 In CSE 2011, 66.67% of the PRELIMS syllabus was changed and in CSE 2013, 57% of the MAINS syllabus was changed.The consequential (!)age relaxations have been framed in such a manner that the CSE 2013 last-attempters(age-wise) will enjoy the entire benefit of the 2 additional attempts.Even, the CSE 2012 last-attempters(age-wise) will get 1 additional attempt in spite of the fact that not even a 1-mark change was introduced in 2012!But astonishingly, the CSE 2011 last-attempters ( age-wise) who faced the first change in the PRELIMS syllabus after a long gap of 32 years(1979-2010) will not even get a single attempt!For these 32 years, the CSE PRELIMS candidates enjoyed the liberty of choosing any one between as many as 23 OPTIONAL SUBJECTS.This liberty was snatched away from them in 2011 and an entirely new paper called CSAT(comprising of 200 marks) was introduced.Right from its inception, this CSAT has been highly disastrous to students of rural background, Hindi and other vernacular mediums and has been literally a DEATHBED for aspirants with non-science, non-engineering and non-management backgrounds.Thus, we can definitely say that the age relaxations allotted by the DOPT is very much non-inclusive and illogical in nature. From this perspective, our demand is very just and fair because it will carry the benefit of the 2 additional attempts to each and every candidate who has exhausted his/her age in any year of the entire transition period(2011-2013).

    ( C )WHY EXCEPTION THIS TIME? History shows that DOPT has always provided age and attempt relaxations to the IAS candidates, whenever there has been any drastic change in the syllabus. In 1979, the first major change in the CSE syllabus in Independent India was initiated on the basis of the recommendations of the KOTHARI Committee.3 fresh attempts and 2 years of age-relaxation were allotted to all candidates, irrespective of the number of attempts they have taken in erstwhile CSEs. The relaxations owing to syllabus change in 2013 has been already awarded which will allow 2 additional attempts to all CSE 2013 last-attempters(age-wise). Then, why will the CSE 2011 last-attempters(age-wise) be deprived?Did the previous government feel that the change brought by CSAT in 2011 was not drastic enough?Let us take a look at some statistics collected from the surveys conducted by the DOPT and UPSC themselves.If we do a comparative analysis of the regional-language candidates qualifying for the CSE MAINS in 2010 and 2011 we get these facts.HINDI -4156(2010) and 1682(2011),TELUGU-69(2010) and 29(2011),TAMIL -38(2010) and 14(2011),KANNADA-38(2010) and 5(2011)!!!!Some more statistics. The successful CSE aspirants join their training in the very next year of the in examination(which they have cleared)year.Similarly,the successful candidates of the first CSAT batch(2011)joined the Foundation Course at the LBSNAA(Lal Bahadur Shastri National Academy of Administration) at Mussourie on September 3 ,2012.This included the probationers of the top 3 posts of the Indian Civil Services.(IAS,IFS and IPS). Just take a look at the comparative study of the background (urban/rural)of these top probationers(IAS,IFS and IPS) with those of the previous 3 Foundation Batches(2009-2011).Year 2009 had 278 candidates(Urban-94 and Rural-184). Year 2010 had 264 candidates( Urban-114 and Rural-150).Year 2011 had 264 candidates(Urban-78 and Rural-186).And now, Year 2012(first CSAT batch) had 269 candidates(Urban-196 and Rural-73)!!!!Thus,the difference created by CSAT becomes as clear as daylight.

    (D) Even the IFS aspirants got relaxations.Then why were 2011 people left out?

    From CSE 2013 onwards, the IAS and the IFS(INDIAN FOREST SERVICE) aspirants are undergoing a common Preliminary Examination (in the form of CSE PRELIMS),though the MAINS Examination is separate.Thus, in 2013, the first batch of IFS aspirants appeared in the CSE Prelims and took CSAT.There has been no change in the IFS MAINS syllabus in 2014.However, the IFS 2014 Examination Notification dated 31-5-2014 published by UPSC brought huge cheers among IFS aspirants. The UPSC has allotted them the benefit of the 2 additional attempts and age relaxation. That means UPSC has admitted that the CSAT Paper has created difficulty for the IFS candidates in 2013.Thats why this compensation has been awarded.Then, why has the UPSC overlooked the interests of the 2011 batch who faced CSAT for the first time?

    (E) 6 YEAR AGE RELAXATION THEORY Now, we have finally arrived at our ultimate solution which can bring an end to the injustice done to lakhs of IAS aspirants.Again referring to history,the DOPT has always awarded 5 years of age relaxation to all categories of aspirants for each and every additional attempt allotted by the government.This is exactly what happened in CSE 1990 (vide Gazette of India Extraordinary notification dated 21.02.1990) and CSE 1992 (vide Gazette of India Extraordinary notification dated 28.12.1991).Many of our critics are arguing that in 1979, when 3 fresh attempts were awarded only 2 years of age relaxation was initiated. They should kindly note that there is a very fundamental difference between FRESH attempt and ADDITIONAL attempt.Let us analyze.In 1979, what the government actually awarded was FRESH attempts.Till CSE 1978, the number of attempts permitted was 3. From CSE 1979, all IAS aspirants became eligible for 3 attempts, irrespective of the number of attempts he/she took in the earlier CSEs(prior to 1979). That means whether he/she had taken 3/2/1/0 shots at the examination prior to CSE 1979, he/she could appear 3 times from CSE 1979 onwards.Till CSE 2013, the maximum number of attempts permitted was 4 for GEN category candidates and 7 for OBC category candidates(SC/ST candidates don’t have any restriction).On 10th February, 2014, the DOPT awarded 2 ADDITIONAL attempts. Thus, the total number of permissible attempts w.e.f.CSE 2014 became 6(4+2) for a GEN category candidate and 9(7+2) for an OBC category candidate. Suppose, he /she has given X number of attempts prior to CSE 2014. So, the number of attempts for which he/she is eligible from CSE 2014 onwards will be 6-X(for GEN) and 9-X(for OBC).This time, the DOPT has awarded not just 1(as in 1990 and 1992), but 2 ADDITIONAL attempts. And the DOPT has clarified that these 2 attempts are permanent in nature .So, naturally, we expect a permanent age relaxation of 6 years(5+1) from CSE 2014 itself. (F) MAKING CSAT QUALIFYING We have already analyzed the disastrous effect of the CSAT on lakhs and lakhs of IAS aspirants.The CSE Preliminary Examination is divided into 2 Papers, GENERAL STUDIES (PAPER I)and CSAT (PAPER II).Both these papers consist of 200 marks each. GENERAL STUDIES also plays a very vital role in the CSE MAINS Examination because it contains 1000 marks.But CSAT does not have much relevance in the MAINS Examination.So, we request the government to change its nature to a qualifying one(where only passing is essential) and count the marks of GENERAL STUDIES Paper only for the Preliminary Screening.

    (G). RAJNATHJIS PROMISE On 30th April, 2014 ,our members at Allahabad submitted their deputations to Shri Rajnath Singh, Honourable Home Minister of India and the President of the BJP( Bharatiya Janata Party).He listened to all our problems very patiently inspite of his hectic election schedule.Realising the graveness of the injustice, Rajnathji immediately announced an age relaxation of 6 years to all candidates from CSE 2014 itself, given that his party comes to power.Now that BJP has won the polls with substantial majority and formed the new government ,we can obviously expect that we will get justice.

    Thus, on the basis of all the above-mentioned reasons, we seek 6 years of age relaxation for all candidates irrespective of any category, from CSE 2014 onwards and making of CSAT qualifying.

    1. The above was on a fb page i hv just copy pasted it….. i m not the part of ”who we are?” but yes.. i support their cause

  4. situation of Telugu/Tamil/kannada medium is much worst in UPSC CSP paper 2 than those of hindi speaking people .
    eg. u dont understand few English words in an comprehension/ MCQ, u can’t understand the paragraph/Q. Hindi people at least can look at the hindi translation of the word and eventually can understand the paragraph/Q. Non hindi speaking state… aspirants….. who studied in regional language, will loose the battle both in english and Hindi. Scrap CSAT…. cos more people who are preparing for Bank POs and other lower level exams and who cant even dream of Civil Services are clearing Prilims putting an obstacle for serious civils aspirants. UPSC don’t need clerks who can answer WHICH OF THE FOLLOWING INS NOT A PRIME NUMBER WHICH DIVIDES SO AND SO Number BY SO AND SO…. BULLSHIT. NO ones ETHICS CAN BE TESTED by a Multiple choice questions or some other type of questions.

  5. Mrunal sir, what are “second generation reforms” which some economic commentators ask for Indian economy?

  6. Q) In India FRBM act provisions are applicable for:
    1)Union government
    2)State government
    3)both 1 & 2
    4) 3 and local self bodies

  7. UPPSC-2014 held on 03 August, admit card download……4m 20 july..

  8. 9- B

    1. Bond question 10 was , which are NOT correctly matched,,,,which is Lake Toba which is in indonesia…hence answer Cright?

      1. Okay boss…

        1. aaate hue bhi jaldi jaldi mein ho gayi na negative marking….:P…. and bhai plz dont take exception to it…

  9. Sir,
    how can we implement capital gains tax on machinery can you please explain

  10. @sankalp Amid this din you provided some respite atleast we will have chance to brush up and taste the water.

  11. plz kya koi ye batatega k yojana kase padhe.too much lenghty ,how can i remember all that having huge material .help meeeeeeee

  12. 3-b
    plz provide ans as well

  13. i hv started my prep very late,just a month ago,so not aware of wht current affairs wr in news.thnx 4 providing such que.atleast i wl search it nd read such topics.thnx 4 que.kindly put sm more.very nervous bcz of current affair que.

  14. @mandark…. bhai I have requested mrunal and waiting for his response…. and thanks for the appreciation…. actually framing questions is my way of revising what I have read…since now I am in full revision mode…..I am trying to recollect things and frame questions (which I do when I have to force-sit along with my boss in the office..so instead of wasting time as I cant open a book there and read….i just sit at my seat….turn the screen away from the hawkish eyes of the boss , recollect things and frame questions…:P

    1. Amit
      Good work, post ur answer with explanation as wel…

      @Mrunal Sir,
      Start a little corner or separate space (If possible) where to put some question (MCQ) & Doubt…
      It’s only a request..

  15. @ MRUNAL SIR
    CGT on buying/selling of shares and Equity in long term (more thn one year) case are exempted only if they are listed and STT is paid on them.

  16. Sir,
    Mera naam sachin hai bt in my MPPSC hall ticket it is (by mistake ) sacin likha hai ….to iske liye mujhe complement karni chahiye ya waha ( exam hall me ) allow kr denge ….means chalega kya .
    plz reply…

  17. the answers 4-A ,6-D ,8-D

  18. gore angrejo ke jaane ke baad desi angrejo ne desh par kabja kar rakha hai desh ko angrejo se aajadi chahiye… VANDE MATRAM!

  19. @Mrunal Sir : In the DTC section from the language ““Indirect (asset) transfers” will be taxed in India, IF the companies involved, have at least 50 percent of their assets located in India.” It appears that the companies will be taxed if half of their asset is in India i.e. in this case if CGP is valued at 55K crore rupees then more than 27.5k crore worth is due to “Hutch Essar India”. But from your explanation given below the statement it appears that Companies will be taxed if they own more than 50% of an Indian Company. Please clarify careful reading of the text creates confusion. In the first reading it appeared OK to me but in the 2nd reading I got confused. Thanks!

  20. @bhardwaj…bro plz have a separate blog for ur mcq till mrunal sir agees.

  21. Is the burden of proof on the tax payer or IT in case of GAAR kinldy clarify?

  22. What is benefit of vodafone in transferring shares from 1 subsidiary to other?

  23. I have RBI GRADE B exam scheduled in aug.I am preparing for the first time and i have no idea which topics to study in GA. I can do other sections well but i need guidance in GA. The economy section on your site is very wide. which topics should i study and which should i leave because i couldnot retain everything i studied even in above topic. due to paucity of time, please tell me from where should I start .I am doing current affairs , i need help in other topics. Thanku.

  24. Our constitution has given recognition to 22 regional languages including Hindi.[English is ‘’NOT THE PART’’ of these 22 languages please mind this]. For more info regarding languages… please read the chapter Official Language from the book, India Polity By Laxmikant.
    India our country is a country of villages… a country of people belonging to socially & economically weak sections. Firstly, we don’t have English medium schools available in every village and small town of our country. Secondly, even if we have then people belonging to lower middle class and below can’t afford sending their children to these schools. In most of the cases parents of these people are illiterate, have no knowledge of English. We all know that even if we send our children to international schools… the parent of that child especially mother plays an important role in the Childs studies, at least in the initial years say up to 7th or 8th standard. Some poor people fear sending their children in English schools since they think that both the parents are illiterate then who will help the child in his homework and other school activities. Thus they prefer the child to go to a regional language medium school or prefer that their child get education in their own mother tongue.. like Marathi, Hindi, Gujhrathi, Kannad, Telugu etc.. as this will help the child to complete his/her education and yes mind it this are the same languages recognized by the constitution. Even Mahatma Ganghi was of the view that people should be taught in their respective mother tongue.
    So in this way some of our brothers & sisters are deprived of English education even in this 21st century!!! And feel low while competing with their English knowing counterparts especially when the authorities/govt. [i.e. their own parent since govt is our ‘’Mai Baap’’] start behaving with them in a discriminating manner.
    So have you ever thought of an UPSC aspirant belonging to the above described group…. A child studied from junior kg to graduation or post graduation level in his mother tongue or his regional language like Marathi, Hindi, Gujhrathi, Kannad, Telugu etc.
    UPSC conducts preliminary exam in English & Hindi only… Do you know what difficulty the aspirants belonging to other languages face?? Hindi language students are facing translation and other related issues with csat like pro IIT, IIM etc… in my opinion that’s true But along with them what about those who have studied from other mediums.. they can’t even think of preparing for UPSC exams [ as good quality material is not available in regional languages] Is it their fault that they studied in regional or Hindi language schools… These people are already facing discrimination in private companies & MNC’s. If UPSC or other govt. organizations will not provide them with a level playing field or not provide them equal opportunity [as our constitution says] then where this people will go.. Please remember as children belonging to middle class & above have aspirations of becoming IAS/IPS so do the children of people belonging to the socially & economically backward class have.
    And why so fuss about the English language?? An IAS/IPS posted in a rural area of any of the States/UT try to learn the respective local/regional language for a better connect with his people… If an IFS is posted to France, Russia etc needs to know the respective official language of that country. Even if UPSC says for IFS English is required then they can make a special requirement that a person well versed in English will only be eligible for IFS posting.
    By the way read this 2 articles for more info on IFS.. the links are provided below….

    In my opinion UPSC should conduct all its exams in all the 22 recognized languages along with English.
    Now the csat paper 2 issue…..
    The UPSC pre exam is conducted in English & Hindi languages. The main problem faced by the Hindi medium students is regarding translation. They say the Hindi part is translated electronically and thus the Hindi used in the paper is of very high level which the Hindi medium students are unable to understand as that higher level Hindi is not used in day to day life or even in Hindi schools & colleges for studies. Also many a times UPSC provides a complete wrong Hindi translation. Ex. According to upsc..”Union Public Service Commission” A sample of English to Hindi translation is as follows………. Tablet = Goli computer, Steel plant = Ispat poodha, Star performer= Nayak karta and there is many more non sense stuff…[people have proof for the same]
    Secondly, though the syllabus for UPSC claims that the English used is of 10th standard level but here also the candidates say it is not less than the level used for graduation. If this is ”true” than how can a student who has studied in Hindi medium right from Jr. KG
    to Graduation/Post Graduation and has English only as his second language will compete with those who are from English medium viz.{our urban friends belonging to middle class and above}.
    The UPSC preliminary exam since 2011has 2 papers for 200 marks each. Paper 1 is about general studies [history, geog., polity, eco, sci, current affairs, governance, rights issues etc] and this paper 1 syllabus also has relevance in the mains exam [since mains consists of General studies 1,2,3,4 moreover same subjects as prelims but requires a more deep study].

    Paper 2 is about Civil services aptitude test i.e. CSAT [Reading comprehension passages with almost 50% weightage, communication skills & inter personal skills never asked yet in the exams, logicial reasoning, mental ability , decision making, Math etc.] with no relevance at all in mains.

    Now here with paper 2 the problem arises….this paper 2 is based on the syllabus of CAT, MAT type of exams with which the candidates belonging to the IIT , IIM , Medical & Science background students are very familiar with and students from humanities background are not familiar and hence they find it difficult to compete the IIT ,IIM type candidates. Also quality study material for this paper 2 especially comprehension part is not available in any language other than English. This year’s many toppers claim that they had not at all prepared for this paper 2 and yet managed to score as high as 180 out of 200 & this same guys get below hundred or even as low as 60 to 70 marks out of
    200 in paper 1.

    For the IIT ,IIM, Medical & Science background students this paper 2 is boon, or say a key to crack the prelims & get a chance to write the mains exam. Though for a student like me who belongs to the urban area & is from English medium with commerce background who also finds csat paper 2 difficult can get 150 plus marks with say a 6 months hardship, as good quality study material is available in English. But what about those lakhs of such Hindi medium rural candidates belonging to humanities background. They don’t even have the quality study material in Hindi required for this paper 2.

    Also for the entire UPSC syllabus [pre, mains & interview] the news paper,’’The Hindu’’, is mandatory & is available in few prominent cities and is in English only. But any ways the serious players belonging to any state or language make a point to do read this news paper. So the non English humanities candidates are already suffering from double trouble [reading The Hindu & Csat paper 2]

    Paper 1 of prelims i.e. general studies [GS] the syllabus is vast & they say GS paper 1 is everything under the sun!! Seeing the difficulty level of this paper, to score excellent marks…. 160 or 170 or 180 + like what masters of paper 2 score is difficult even for the best candidate who has a good grip over GS subjects.

    Paper 2 of prelims i.e. CSAT the syllabus is limited [I have mentioned above what topic it covers]. Also the people who have practiced it during their IIT & IIM or Medical exams find it easy as IIT, IIM entrance exams viz. CAT, MAT are much more difficult than UPSC’s CSAT & hence they easily score 180 + that too without any extra pains.

    Another discrimination of this UPSC prelims is……both the papers are 200 marks each, then why UPSC has kept minimum passing marks 30 only for paper 1 & minimum passing marks 70!!! For paper 2 i.e CSAT. Why this difference of such huge
    margin… Does UPSC has some logic for this???

    I can provide you links of some forums, websites where people are discussing and saying, “concentrate on paper 2 CSAT… that is the key to crack the pre exams and get a chance to write mains’’. Now when such type of people pass the prelims they suffer in mains due to their loose grip on the core GS topics and score less marks in mains GS papers [paper 1,2,3&4] & hence the low cut off year by year. Even this years toppers have scored around minimum 60 to maximum 75 or 80 per GS paper out of 250 marks that are allotted for each GS paper… on an average it is less than 30%!!! Per general studies paper. Are this toppers!!! IAS!!!

    And yes to check the English language skills of the candidate… they already have a complete English language paper in mains [I think it is qualifying nature paper and marks are not counted in mains not very sure about this]… then why the need to check it in prelims ??

    Don’t you think this is a discrimination they are facing???

    Not only Hindi but all other regional languages candidates are facing the heat. Even Nigvekar committee is opposed to csat…

    Also if UPSC was so keen to bring in CSAT then they should have done it gradually and not suddenly…. And the points from my side are many more… but I am stopping my self here itself from writing anything more…..
    Agar yeh padhne ke baad app mujhse ittifaq rakhte hai… toh kripaya… hindi & Anaya shetyriya [regional] bhashao kay hamare bhaio behno ko kosna bandh kare…….

  25. Thnx sir..
    Really ur articles helping me alot…
    Nice and systematic explanations..

  26. good and interesting articles…..but i must say…@mrunal..your website is really patheitc and full of ads and chaos. Get a new one coded with latest technologies

  27. Hahaha.Would General Dong sing for him and the Shome meme (now I can…). Hilarious. Never Going to forget GAAR now!!
    Thanks Mrunal! :)

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