Question
Which one of the following situations best reflects “Indirect Transfers” often talked about in media recently with reference to India?
Correct Answer — D
Explanation
Correct answer: (d) A foreign company transfers shares and such shares derive their substantial value from assets located in India
An Indirect Transfer occurs when a foreign parent company transfers equity shares to another offshore entity, but those shares derive their substantial economic value from assets physically situated in India.
This principle was codified through the retrospective amendment to the Income-tax Act, 1961 via the Finance Act, 2012 — best known from the landmark Vodafone tax controversy — to bring such offshore indirect transfers under Indian capital-gains tax.