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UPSC PYQPrelims 2022

Civil Services Examination · Question 8

Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?

  1. An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
  2. A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
  3. An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
  4. A foreign company transfers shares and such shares derive their substantial value from assets located in India
Show answer & explanation

Answer: (D) A foreign company transfers shares and such shares derive their substantial value from assets located in India

Explanation

Indirect transfer refers to transfer of shares of a foreign entity whose value substantially derives from Indian assets (e.g., the Vodafone and Cairn retrospective tax cases).