Section 738 — Income Tax Act 2007: Meaning of “commercial transaction”

Meaning of “commercial transaction” 738 1 For the purposes of section 737, a relevant transaction is a commercial transaction only if it meets the conditions in subsections (2) and (3).

2 It must be effected—

a in the course of a trade or business and for its purposes, or b with a view to setting up and commencing a trade or business and for its purposes.

3 It must not—

a be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or b be a transaction that would not have been entered into between such persons so dealing.

4 For the purposes of subsection (2), making investments, managing them or making and managing them is a trade or business only so far as—

a the person by whom it is done, and b the person for whom it is done, are persons not connected with each other and are dealing at arm's length.