Examine and state the correctness or otherwise of each of the following in the context of BEPS Action Plan and Income-tax Act, 1961 and answer in…

(a) Note – The facts given in the question are similar to the facts in SAP Labs India Pvt. Ltd. v. ITO [2023] 454 ITR 121 wherein the issue came up before the Supreme Court. The above answer is based on the rationale of the Supreme Court in the said case (i) Incorrect - Country by Country (CbC) report requires MNEs to provide an annual report of economic indicators viz. the amount of revenue, profit before income tax, income tax paid and accrued in relation to the tax jurisdiction in which they do business. (ii) The Action Plans were structured around three fundamental pillars viz.: (a) Introducing 'coherence' in the domestic rules that affect cross-border activities. (b) Reinforcing of 'substance' requirements in existing international standards; Alignment of taxation with location of value creation and economic activity; and (c) Improving transparency and tax certainty. (iii) There is a need for countries to collaborate on tax matters so that they are able to get their due share of taxes due to following reasons – The interaction of separate sets of domestic laws enforced by sovereign countries causes frictions, including potential double taxation for corporations operating in many countries.It also causes gaps, in cases where corporate income is untaxed, both in the country of source and in the country of residence, or is taxed only at nominal rates.BEPS relates primarily to instances where the interaction of different tax rules & tax systems leads to double non-taxation.It also relates to arrangements that achieve no or low taxation by shifting profits away from the jurisdictions where the activities creating those profits take place.