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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, when an arrangement is declared an impermissible avoidance arrangement, which treatment is expressly permitted regarding the place of residence of a party or the situs of an asset?

The law permits treating the residence of any party, or the situs of an asset or transaction, at a place other than the one stated in the arrangement. This lets the tax authorities look past artificial location choices; it is not restricted to assets alone or to Indian companies.

  1. AResidence and situs must always be accepted as stated in the arrangement
  2. BOnly the situs of an asset may be changed, never the residence of a party
  3. CResidence or situs may be treated as being at a place other than that provided under the arrangementCorrect
  4. DResidence may be changed only if the party is an Indian company

Explanation

Section 181(2)(f) permits treating the place of residence of any party, or the situs of an asset or transaction, at a place other than that provided under the arrangement. Options A, B and D add restrictions that the text does not contain.

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