Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?

1. A

   An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment

   Indian firm taxed abroad on its foreign profits. Ordinary outbound investment, not an indirect transfer.

2. B

   A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment

   Foreign firm taxed at home on Indian profits. Residence taxation, not the Vodafone-type transfer.

3. C

   An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India

   Indian firm selling foreign tangibles. A direct asset sale abroad.

4. D

   A foreign company transfers shares and such shares derive their substantial value from assets located in India

   A foreign company transfers shares that derive substantial value from Indian assets. That is the indirect-transfer case.

Summary. Official key is (d). Indirect transfer is a change in control of a foreign company whose shares get their value from assets in India (Vodafone / Explanation 5 to section 9). The other three are ordinary cross-border investment or asset sales.