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

Which one of the following situations best reflects "Indirect…

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

Answer

(a) This is ordinary outbound investment taxation, not an indirect transfer. Verdict: Incorrect.
(b) This describes foreign investment and taxation in the home country, but not transfer of value through Indian underlying assets. Verdict: Incorrect.
(c) This is direct sale of tangible foreign assets by an Indian company; it is not the tax concept of indirect transfer. Verdict: Incorrect.
(d) Under India’s tax law, indirect transfer refers to transfer of shares of a foreign entity whose value is substantially derived from assets located in India (Vodafone-type issue). Verdict: Correct.