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

Under the Income-tax Act, 2025, a transaction of business restructuring or reorganisation entered into by an enterprise with its associated enterprise (one of them being non-resident) is treated as an international transaction. Which statement about this treatment is correct?

A business restructuring or reorganisation with an associated enterprise is an international transaction regardless of whether it affects profit, income, losses or assets now or in future, provided one of the enterprises is non-resident. No profit or loss effect is required for it to qualify.

  1. AIt is an international transaction only if it increases the profit of the Indian enterprise at the time of the transaction
  2. BIt is an international transaction irrespective of whether it has any bearing on profit, income, losses or assets at the time or at any future dateCorrect
  3. CIt is an international transaction only if it results in a loss or reduction of assets in India
  4. DIt is an international transaction only if both associated enterprises are non-residents

Explanation

Section 163(1)(e) covers business restructuring or reorganisation with an associated enterprise irrespective of any bearing on profit, income, losses or assets, now or later. Options tying it to profit or loss add a condition the text does not contain. Also, only one of the enterprises must be non-resident, not both.

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