Section 97 of ITA, 1961 : Section 97: Arrangement To Lack Commercial Substance
ITA, 1961
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Explanation using Example
Imagine a company, XYZ Ltd., which is based in India and has a subsidiary in a country with lower tax rates. The subsidiary doesn't engage in any real business activities but exists solely to take advantage of the lower tax rate. XYZ Ltd. loans money to the subsidiary, which then loans the same money back to XYZ Ltd. This is a classic example of round trip financing, where the only...
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