COMPONENTS OF ASSOCIATED ENTERPRISE
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ASSOCIATED ENTERPRISE – ARTICLE 9(1) OF INDIA – USA TREATY
Where
a. an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State ; or
a. the same persons participate directly or indirectly in the management, control, or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which, but for those conditions would have accrued to one of the enterprises, but by reason of those conditions have not so accrued, may be included in the profits of that enterprise and taxed accordingly.
ENTERPRISE – DIRECT OR INDIRECT PARTICIPATION
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SAME PERSON – DIRECT OR INDIRECT PARTICIPATION
ARTICLE 9(1) – CHARACTERISTICS
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CONTROL
CASE 1 – SALES AT MORE THAN ALP
CIT V NESTLE INDIA LTD. – CASE STUDY
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ARTICLE 9(2) OF THE INDIA USA TREATY – CORRELATIVE ADJUSTMENTS
Where a Contracting State (INDIA) includes in the profits of an enterprise of that State, and taxes accordingly, profits on which an enterprise of the other Contracting State has been charged to tax in that other State,
and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State (INDIA) if the conditions made between the two enterprises had been those which would have been made between independent enterprises,
then that other State (USA) shall make an appropriate adjustment to the amount of the tax charged therein on those profits.
In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall, if necessary, consult each other.
CASE STUDY – CORRELATIVE ADJUSTMENT
CORRELATIVE ADJUSTMENTS
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METHODS OF CORRELATIVE ADJUSTMENT
SECONDARY ADJUSTMENT
SECONDARY ADJUSTMENT FOR EXCESS FTS
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ASSOCIATED ENTERPRISES AS PER PROVISION OF IT ACT
DIRECT OR INDIRECT HOLDING OF 26% OR MORE VOTING POWER IN THE ENTERPRISE
COMMON PERSON/ ENTERPRISE HAS DIRECT OR INDIRECT HOLDING OF 26% OR MORE VOTING POWER IN TWO ENTERPRISE
LOAN TO AN ENTERPRISE NOT LESS THAN 51% OF BOOK VALUE OF TOTAL ASSETS
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GUARANTEE OF NOT LESS THAN 10% OF TOTAL BORROWINGS
APPOINTMENT BY ENTERPRISE OF BOARD OF DIRECTORS OR MEMBERS OF THE GOVERNING BOARD
APPOINTMENT BY SAME PERSON – BOARD OF DIRECTORS OR MEMBERS OF THE GOVERNING BOARD
KNOW HOW ETC. USED IN MANUFACTURE OR PROCESSING OF GOODS OR ARTICLES
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RAW MATERIAL / CONSUMABLES REQUIRED FOR MANUFACTURE OR PROCESSING OF GOODS OR ARTICLES
PRICE INFLUENCED BY PURCHASERS OF ARTICLE
COMMON INDIVIDUAL/RELATIVE CONTROL
HUF CASES
OWNERSHIP OF MORE THAN 10% IN FIRM/AOP/BOI
OTHER PRESCRIBED RELATIONSHIP
CASE STUDY 2
