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- Associated Enterprises - Meaning and definition - Transfer Pricing - CA Final International Taxation Elective Paper 6C - CA Arinjay Jain

Transfer Pricing provisions are applicable for international transaction between Associated enterprise (It is also applicable on certain specified domestic transaction between Associated enterprise). Such Associated enterprise may be actual AE , where they are covered under specific provisions defining AE’s under the IT Act, 1961, or under certain circumstances may be “Deemed as Associated Enterprises” (applicable to taxpayers, who try to circumvent being covered under Associated Enterprise provisions, through the use of structures involving third parties).

As per Section 92A (1) of the Act, the following cases would be covered within the definition of Associated enterprise : -

I. DIRECT OR INDIRECT PARTICIPATION IN MANAGEMENT, CONTROL OR CAPITAL OF ANOTHER ENTERPRISE BY AN ENTERPRISE


An enterprise (“F1”) , which participates directly or indirectly, or through one or more intermediaries in :
• Management of the “other enterprise” (“ICO”), or
• Control of the “other enterprise” (“ICO”), or_
• Capital of the “other enterprise” (“ICO”).

Under this clause, the enterprise, which ITSELF (“F1”) participates directly or indirectly in the Management, control or capital of the other enterprise, is treated as an Associated Enterprise with the enterprise, in which it has management, control or capital (“ICO”).

II. DIRECT OR INDIRECT PARTICIPATION IN MANAGEMENT, CONTROL OR CAPITAL OF ANOTHER ENTERPRISE JOINTLY BY ONE OR MORE ENTERPRISE

If one or more persons (“A and B”), participates directly or indirectly, or through one or more intermediaries in : -
• Management of two different enterprises;
• Control of two different enterprises;
• Capital of two different enterprise.

Under this clause , where one or more person (Participant/s), participate directly or indirectly in the Management, control or capital of another enterprise, the participants, between themselves (“A and B”), would be treated as Associated Enterprise .

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