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

Under the Income-tax Act, 2025, the definition of 'international transaction' expressly lists a transaction of business restructuring or reorganisation entered into by an enterprise with an associated enterprise. Which statement about this limb is correct?

A business restructuring or reorganisation 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. Present profit impact is not a precondition, though one party must be non-resident.

  1. AIt applies only if the restructuring changes the profit, income, losses or assets of the enterprises at the time of the transaction
  2. BIt applies irrespective of whether it has any bearing on profit, income, losses or assets at the time of the transaction or at any future dateCorrect
  3. CIt applies only if both associated enterprises are non-residents
  4. DIt applies only if the restructuring results in a transfer of tangible property

Explanation

The restructuring limb of the definition of international transaction covers a business restructuring or reorganisation with an associated enterprise irrespective of any bearing on profit, income, losses or assets, now or later. The option requiring a present effect on profit is wrong because the text expressly removes that condition. The definition requires only that at least one party be non-resident.

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