Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India? (a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment (b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment (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 (d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

This question pertains to indirect transfers and the related issue of retrospective taxation in India.

Indirect Transfers: These involve the transfer of shares of foreign entities that own assets in India, instead of directly transferring the assets themselves. This is a method that was sometimes used to avoid taxes in India.

Retrospective Taxation: India introduced retrospective taxation in 2012, which allowed the government to tax income from the sale of shares of foreign companies with retrospective effect. This move generated considerable controversy.

However, the Taxation Laws (Amendment) Act, 2021, effectively nullified the retrospective taxation that had been introduced in 2012.

Option (d) accurately describes indirect transfers: A foreign company transfers shares, and the value of those shares is substantially derived from assets located in India.

Hence, option (d) is the correct answer.