CMA Final · Direct Tax Laws and International Taxation · Business Restructuring

Orion Pharma India Ltd, a resident company, has no associated-enterprise relationship with Zeta Ltd, a Singapore company. However, the terms of Orion's restructuring-related supply arrangement with Zeta were determined in substance between Zeta and Orion's foreign parent, which is an associated enterprise of Orion. How is the Orion–Zeta transaction treated under the Income-tax Act, 2025?

The transaction is deemed an international transaction. Under the deeming rule, a deal with a non-associated person is treated as one between associated enterprises when its terms are determined in substance between that person and the associated enterprise, and a non-resident is involved. The alternative prior-agreement test is not required.

1. AIt is not an international transaction because Zeta is not an associated enterprise of Orion
2. BIt is deemed an international transaction between two associated enterprises, since the terms are determined in substance between the other person and the associated enterprise, and the associated enterprise is a non-residentCorrect
3. CIt is an international transaction only if Zeta is a resident of India
4. DIt is an international transaction only if a written prior agreement exists; substance of determination is irrelevant