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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 an associated enterprise is treated as an international transaction. Which condition applies to such a transaction?

A business restructuring or reorganisation transaction with an associated enterprise is an international transaction irrespective of whether it affects profit, income, losses or assets, at the time of the transaction or at any future date. No profit effect or tangible property transfer is needed.

  1. AIt counts only if it reduces the profit of the Indian enterprise in the year of the transaction
  2. BIt counts irrespective of whether it has any bearing on profit, income, losses or assets at the time or in futureCorrect
  3. CIt counts only if it results in a transfer of tangible property
  4. DIt counts only if both associated enterprises are non-residents

Explanation

Section 163(1)(e) includes a business restructuring or reorganisation transaction with an associated enterprise irrespective of any bearing on profit, income, losses or assets, now or later. One of the enterprises must be non-resident, so the 'both non-resident' option is wrong. The profit-reduction condition is also not required.

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