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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Under the Income-tax Act, 2025 (applicable from the June 2027 session), which feature is essential for a transaction between two or more associated enterprises to qualify as an 'international transaction' under section 163?

The essential feature is that the transaction is between associated enterprises and at least one of them is necessarily a non-resident. Both need not be non-resident, no loss is required, and the transaction types are not limited to tangible property.

  1. ABoth enterprises must be non-residents
  2. BAt least one of the enterprises must necessarily be a non-residentCorrect
  3. CThe transaction must result in a loss to one enterprise
  4. DThe transaction must relate only to tangible property

Explanation

Section 163(1) defines an international transaction as a transaction between two or more associated enterprises, one of which is necessarily a non-resident. Both being non-resident is not required. A loss or bearing on profit is not a precondition for the main definition, and the list covers tangible property, intangibles, finance, services and more.

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