RRaahUPSC
2022 · EconomyPrevious Year Question
Q8.
Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?
A. An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
B. A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
C. An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
D. A foreign company transfers shares and such shares derive their substantial value from assets located in India
Answer

D

Explanation

Indirect transfers refer to situations where foreign entities own shares or assets in India, and the shares of such foreign entities are transferred instead of a direct transfer of the underlying assets in India. The 2012 Finance Act amended the IT Act to impose tax liability on income earned from the sale of shares of a foreign company if they derive their value substantially from assets located in India. The Taxation Laws (Amendment) Act, 2021 nullified this retrospective taxation.
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