Associated Enterprises [Section 92A] :
The term “associated enterprise” in relation to another enterprise is defined in section 92A(1). It means an enterprise –
(a) which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or
(b) in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in its management or control or capital are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control of the other enterprise.
Section 92A(2) provides that two enterprises shall be deemed to be associated enterprises for the purposes of sub-section(1) if, at any time during the previous year –
(i) one enterprise holds, directly or indirectly, shares carrying not less than twenty six per cent of the voting power in the other enterprise; or
(ii) any person or enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in each of such enterprises; or
(iii) a loan advanced by one enterprise to the other enterprise constitutes not less than fifty one per cent of the book value of the total assets of the other enterprise; or
(iv) one enterprise guarantees not less than ten per cent of the total borrowing of the other enterprise; or
(v) more than half of the board of directors or members of the governing board, or one or more executive directors or executive members of the governing board of one enterprise, are appointed by the other enterprise; or
(vi) more than half of the directors or members of the governing board, or one or more of the executive directors or members of the governing board, of each of the two enterprises are appointed by the same person or persons; or
(vii) the manufacture or processing of goods or articles or business carried out by one enterprise is wholly dependent on the use of know-how, patent, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or
(viii) ninety per cent, or more of the raw materials and consumables required for the manufacture or processing of goods or articles carried out by one enterprise are supplied by the other enterprise, or by persons specified by the other enterprise, and the prices and other conditions relating to the supply are influenced by such other enterprise; or
(ix) the goods or articles manufactured or processed by one enterprise, are sold to the other enterprise or to persons specified by the other enterprise, and the prices and other conditions relating thereto are influenced by such other enterprise; or
(x) where one enterprise is controlled by an individual, the other enterprise is also controlled by such individual or his relative or jointly by such individual and relative of such individual; or
(xi) where one enterprise is controlled by a Hindu undivided family, the other enterprise is controlled by a member of such Hindu undivided family, or by a relative of a member of such Hindu undivided family, or jointly by such member and his relative; or
(xii) where one enterprise is a firm, association of persons or body of individuals, the other enterprise holds not less than ten per cent interest in such firm, association of persons or body of individuals; or
(xiii) there exists between the two enterprises, any relationship of mutual interest, as may be prescribed. It may be noted that the Rules 10A to 10E do not refer to any relationship of mutual interest.
Section 92A(1) lays down the circumstances when two enterprises can be considered as associated enterprises. The mere fact of participation by one enterprise in the management, control or capital of the other enterprise, or participation by one or more persons in the management, control or capital of both the enterprises is not sufficient unless the tests laid down in section 92A(2) are fulfilled. In other words, the deeming tests contained in section 92A(2) are exhaustive and should be applied to determine the association between two or more enterprises
- Enterprise : The term “enterprise” is defined in section 92F to mean a person (including its certain specified Permanent Establishment) who is, or has
been, or is proposed to be, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or know-how, patents, copy rights, trademarks, licences, franchises or any other business or commercial rights of similar nature or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights, or the provision of services of any kind, or in carrying out any work in pursuance of a contract, or in investment, or providing loan or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, whether such activity or business is carried on, directly or through one or more of its units or divisions or subsidiaries, or whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or places.
“Permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.