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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Under the Income-tax Act, 2025, an arrangement is deemed to lack commercial substance if it involves or includes any one of certain features. Which of the following is one of those listed features?

Round trip financing is a listed feature that deems an arrangement to lack commercial substance. Payment of taxes, the duration of the arrangement and an exit route are only relevant factors and are not sufficient on their own to decide the matter.

  1. ARound trip financingCorrect
  2. BPayment of tax at the full normal rate
  3. CExistence of the arrangement for more than five years
  4. DProvision of an exit route for the business

Explanation

Section 180(1)(b) lists round trip financing, an accommodating party, offsetting or cancelling elements, and transactions disguising value, location, source, ownership or control of funds. Section 180(3) says the period of the arrangement, payment of taxes and the provision of an exit route may be relevant but are not sufficient to decide the question.

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