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Current Affairs 28 March 2019 Digest 2: US resolution to ban JeM Chief Masood Azhar; India, US sign agreement for exchange of CbC Reports

The United States circulated a draft resolution at the United Nations Security Council (UNSC) to blacklist Chief of Pakistan-based terrorist group Jaish-e-Mohammad (JeM), Masood Azhar.

Mar 28, 2019 11:01 IST
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Story 1: US circulates Draft Resolution at UNSC to blacklist JeM Chief Masood Azhar

The United States on March 27, 2019 circulated a draft resolution at the United Nations Security Council (UNSC) to blacklist Chief of Pakistan-based terrorist group Jaish-e-Mohammad (JeM), Masood Azhar.

Azhar is linked to terrorism for "participating in the financing, planning, facilitating, preparing, or perpetrating of acts or activities carried out by JeM”.

The resolution states that Azhar will be added to the UN Al-Qaeda and Islamic State Sanctions blacklist. It would lead to global travel ban, an assets freeze and an arms ban for Azhar.

The resolution is backed by France and United Kingdom.

Resolution condemns Pulwama terror attack

The draft resolution condemns the Pulwama terror attack wherein a suicide bomber killed an Indian army convoy on February 14, 2019 of over 40 CRPF personnel in Jammu and Kashmir's Pulwama district.

The responsibility of the attack was claimed by a Pakistan-based militant group, Jaish-e-Mohammad (JeM), which is led by Masood Azhar.

In the wake of the Pulwama terror attack, India launched a major diplomatic action against Pakistan, holding briefing for envoys of 25 countries, including five permanent UNSC members - the US, China, Russia, the UK and France, to highlight Pakistan's role in using terrorism as an instrument of state policy.

Fourth proposal to designate Masood Azhar as "global terrorist"

So far, there have been four attempts through a UN sanctions committee to list Azhar as a ‘global terrorist’ and add him to the blacklist. China had blocked three previous requests and put a technical hold on the latest one in the beginning of March 2019.

The fourth proposal was moved by P3 countries (France, United Kingdom and United States) on February 27, 2019 to the 1267 Al-Qaida Sanctions Committee of the UN Security Council in wake of Pulwama terror attack by Pakistan-based terror group JeM that killed over 40 CRPF personnel in India.

The members of the Al-Qaida Sanctions Committee were given a time limit of 10 working days to raise any objections to the proposal.

If there is no objection to the proposal by the end of the no-objection period, the decision is deemed to be adopted.

The no-objection period deadline was scheduled to end on March 14, 2019 (Indian Time). However, just before the deadline, China blocked the proposal with a ‘technical hold’ and asked for "more time to examine" the proposal.

The technical hold is valid for up to six months and it can be extended by three months thereafter.

Jaish-e-Mohammed's chief Masood Azhar

  • Masood Azhar is the founder and the leader of Jaish-e-Mohammed, and he meets the criteria for designation as the global terrorist by the United Nations.
  • Azhar is a former leader of the terrorist group Harakat al-Mujahadin and had given a call to volunteers to join the fight in Afghanistan against Western forces.
  • He was the mastermind of the attack on the air base in Pathankot, India in January 2016.
  • JEM has been responsible for numerous terrorist attacks such as 2008 Mumbai attacks and is a threat to regional stability and peace.


Story 2: India, US sign agreement for exchange of Country-by-Country reports

India and the United States on March 27, 2019 signed an Inter-Governmental Agreement for Exchange of Country-by-Country (CbC) Reports between the countries.

The Agreement was signed by PC Mody, Chairman of the Central Board of Direct Taxes and Kenneth I Juster, Ambassador of the United States to India.

Significance

This Agreement for Exchange of CbC Reports, along with the Bilateral Competent Authority Arrangement, will enable the countries to automatically exchange CbC Reports filed by the parent entities of Multinational Enterprises (MNEs) in the respective jurisdictions with effect from January 1, 2016.

It would also do away with the practice of local filing of the CbC Reports by India-based subsidiary companies of the US MNEs. The absence of an Agreement between India and USA till now entailed a possibility of local filing of CbC Reports in India.

Objective

The objective is to ensure that all tax authorities have access to the same information about an MNC’s value chain and the resulting tax consequences.

As per the Sub-section (4) of Section 286 of the Income-tax Act, 1961, India constituent entities of multinationals has to furnish a Country-by-Country (CbC) Report for a reporting accounting year within the period as may be prescribed.

India entities are required to locally file the country-by-country report in the following situations:

Where the parent entity of the India constituent entity is ‘not obligated’ to file a country-by-country report

Where India does not have an agreement for the exchange of the country-by-country report with the country in which the ultimate parent entity are resident

Where there has been a systemic failure of the country to exchange country-by-country reports with a country in which the ultimate parent entity is resident and the failure is intimated by the prescribed authority to the India constituent of the international group.

What is a Country-by-Country (CbC) Report?

The Multinational Enterprises (MNEs) or multi-national companies having global consolidated revenue of 750 Million Euros (Rs 5500 crore) or more in a year are required to file CbC Reports in their parent entity’s jurisdiction.

A Country-by-Country (CbC) Report contains aggregated country-by-country information relating to the global allocation of income, the taxes paid, and certain other indicators of a multi-national company.

It also contains a list of all the constituent entities of the multi-national company operating in a particular jurisdiction and the nature of the main business activity of each constituent entity.

This information enables an enhanced level of assessment of tax risk by both tax administrations.

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