Income Tax Act, 1961
Section 5: Subs. by s. 34, ibid., for “that sub-section” (we.f. 12013).
5. Subs. by s. 34, ibid., for “that sub-section” (we.f. 12013).
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1[(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises
if, at any time during the previous year,—]
(a) one enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent.
of the voting power in the other enterprise; or
(b) 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
(c) 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
(d) one enterprise guarantees not less than ten per cent. of the total borrowings of the other
enterprise; or
(e) 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
(f) 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
(g) the manufacture or processing of goods or articles or business carried out by one enterprise is
wholly dependent on the use of know-how, patents, copyrights, trade-marks, 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
(h) 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
(i) 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
(j) 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
(k) 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
(l) 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
(m) there exists between the two enterprises, any relationship of mutual interest, as may be
prescribed.
1. Subs. by Act 20 of 2002, s. 40, for “(2) Two enterprises shall be deemed to be associated enterprises, if, at any time
during the previous year,—” (w.e.f. 12002).
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For the purposes of sub-section
one enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent.
of the voting power in the other enterprise; or
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
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
one enterprise guarantees not less than ten per cent. of the total borrowings of the other
enterprise; or
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
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
the manufacture or processing of goods or articles or business carried out by one enterprise is
wholly dependent on the use of know-how, patents, copyrights, trade-marks, 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
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
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
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
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
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
there exists between the two enterprises, any relationship of mutual interest, as may be
prescribed.
1. Subs. by Act 20 of 2002, s. 40, for “
Two enterprises shall be deemed to be associated enterprises, if, at any time
during the previous year,—” (w.e.f. 12002).
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