Section 162 — Meaning of associated enterprise

(1) For the purposes of this Chapter, the expression “associated enterprise”,
in relation to another enterprise, means an enterprise—
( a) which participates, directly or indirectly, or through one or more interme-
diaries, in the management or control or capital of the other enterprise
in the following manner,—
( i) one or more persons who participate, directly or indirectly, or
through one or more intermediaries, in management or control or
capital of one enterprise, also participate, directly or indirectly, or
through one or more intermediaries, in the management or control
or capital of the other enterprise; or
( ii) one enterprise holds, at any time during the tax year, directly or
indirectly, shares carrying not less than 26% of the voting power
in the other enterprise; or
( iii) any person or enterprise holds, at any time during the tax year,
directly or indirectly, shares carrying not less than 26% of the voting
power in each of such enterprises; or
( b) which has advanced a loan to the other enterprise and such loan consti-
tutes not less than 51% of the book value of the total assets of the other
enterprise; or
( c) which guarantees not less than 10% of the total borrowings of the other
enterprise; or
( d) whose more than half of the board of directors or members of the gov -
erning board, or one or more executive directors or executive members
of the governing board, are appointed by the other enterprise; or
( e) whose 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, are appointed by the same person or persons, who has or have
done so for the other enterprise; or
( f) in case of which, manufacturing or processing of goods or articles or
business carried out by such enterprise is wholly dependent on the use
of know-how, patents, 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
( g) in case of which, 90% or more of the raw materials and consumables
required for the manufacture or processing of goods or articles carried
out by such 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
( h) in case of which, the goods or articles manufactured or processed by such
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
( i) which is controlled by an individual, and the other enterprise is also
controlled by such individual or his relative or jointly by such individual
and relative of such individual; or
( j) which is controlled by a Hindu undivided family, and the other enter -
prise 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
( k) which is a firm, association of persons or body of individuals, and the
other enterprise holds not less than 10% interest in such firm, association
of persons or body of individuals; or
( l) which has any relationship of mutual interest with the other enterprise,
as may be prescribed.
(2) In relation to a specified domestic transaction entered into by an assessee,
associated enterprise shall also include—
( a) other units or undertakings or businesses of such assessee in respect of
a transaction referred to in section 122 or 140(9);
( b) any other person referred to in section 140(13) or 205(4)32 in respect of
a transaction referred to therein; and
19[(c) other units, undertakings, enterprises or business of such assessee, or other
person referred to in section 140(13) in respect of transactions referred to
in Chapter VIII, to which the provisions of section 140(9) or (13) of this
Act or section 80-IA(8) or (10) of the Income-tax Act, 1961 (43 of 1961)
are applicable.]