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

An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
A foreign company transfers shares and such shares derive their substantial value from assets located in India

Explanation:

Indirect transfers refer to situations where foreign entities own shares or assets in India, and the shares of such foreign entities are transferred instead of a direct transfer of the underlying assets in India. In the context of the given situations, the one that best reflects indirect transfers is:

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

This situation involves the transfer of shares of a foreign company that indirectly owns assets in India, which is the core concept of indirect transfers. The other situations do not involve the transfer of shares or assets of foreign entities that have holdings in India and are therefore not examples of indirect transfers.