Part 15: Prevention Of Tax Avoidance
Chapter I: General Provisions Relating To Prevention Of Tax Avoidance
Section 233 (Definitions.)
clause 1: arm's length price means a price in a transaction, the conditions (e.g. price, margin or profit split) which do not differ from the conditions that would have prevailed in a comparable uncontrolled transaction between independent entities carried out under comparable circumstances;
clause 2: associated enterprise means any enterprise, directly or indirectly or through 1 (one) or more intermediate entities, participates in the management or control or capital of the other enterprise, and is bound by the following relationship with any other enterprise, namely: (a) the same person or persons (including his/her spouse, successors or predecessors), directly or indirectly or through 1 (one) or more intermediary entities, participates in the management or control or capital of both enterprise; (b) one enterprise holds, directly or indirectly, shares carrying more than twenty-five percent of the voting power in the other enterprise; (c) the same person or persons, [including his/her spouse, successors or predecessors) carrying more than 25% (twenty-five percent of the voting power] holds, directly or indirectly, both shares; (d) more than half of the Board of directors or members of the governing Board of one enterprise are appointed by the other enterprise; (e) any executive director or executive member of the governing Board of one enterprise is appointed by, or is in common with the other enterprise; (f) the same person or persons appoint more than half of the Board of directors or member in both enterprises; (g) the same person or persons appoint any executive director or executive member in both enterprises; (h) one enterprise has the practical ability to control the decision of the other enterprise;(i) both organizations are members, subsidiaries or concerns of the same parent company or group; (j) the two enterprises are bounded by such relationship of mutual interest as may be prescribed; (k) the cumulative amount of borrowings of one enterprise from the other enterprise constitutes more than 50% (fifty percent) of the book value of the total assets of that other enterprise; or (l) the cumulative amount of guarantees provided by one enterprise in favour of the other enterprise constitutes more than 10% (ten percent) of the book value of the total borrowings of the other enterprise.
clause 3: enterprise means a person or a venture of any nature (including a permanent establishment of such person or venture);
clause 4: independent enterprise means an enterprise that is not an associated enterprise;
clause 5: international transaction means any transaction between any associated enterprise, either or both of which is non-resident, by way of purchase, sale or lease of property, tangible or intangible, or provision of services, or lending or borrowing of money, or any other transaction bearing on the profit, income, loss, means any other transaction relating to assets, financial position or economic value, and includes any transaction of C with B if A has control over such transaction, in which case (a) B and A are associated enterprise; and (b) C is not an associated enterprise of B;
clause 6: property includes goods, articles, things or items, patent, invention, formula, process, design, pattern, know-how, copyright, trademark, trade name, brand name, literary, musical, or artistic composition., franchise, license or contract, method, program, software, database, system, procedure, campaign, survey, study, forecast, estimate, customer list, technical data, any aspects of advertising and marketing, any item which has substantial value, or any other intangible property;
clause 7: record includes electronically held information, documents and records;
clause 8: Transfer Pricing Officer means any income tax authority authorized by the Board to perform the function of a Transfer Pricing Officer;
clause 9: transaction includes an arrangement, understanding or action between two or more parties, whether or not such arrangement, understanding or action is final or in writing; or whether or not it is intended to be enforceable by legal proceeding;
clause 10: uncontrolled transaction means a transaction undertaken between enterprises not being the associated enterprises.