

Associated Enterprise is any company that participates directly or indirectly or through one or more consultants in the management or control, or other company in terms of the Act. If a company has a voting share of 26% or more in another business, it will be considered a Joint Company. Therefore, the term refers to entities that are under common ownership, management, or control.
If there is an international transaction between two related businesses, the transfer price rules apply. Functions covered under the transfer price policy include the purchase, sale, or lease of tangible or intangible assets, the provision of services, loans or mortgages, a cost-sharing system, or any other transaction, which contributes to profit, income, or loss of enterprise goods.
If such a transaction occurs between affiliated businesses, the revenue from the transaction should be calculated by taking into account the length of the arm.
If such a transaction occurs between affiliated businesses, the revenue from the transaction should be calculated by taking into account the length of the arm.
Arm’s length price is the price at which private parties charge under uncontrollable conditions. An uncontrolled condition is a transaction that takes place between two independent entities under the free market power. Therefore, international transactions between two related businesses should take place at arm-length prices.
The following are some of the accepted ways to calculate the arm length:
- Comparable Price Comparison method
- Resale Price Method
- Cost Plus Method
- How to split profit method
- Transaction Net Margin method
- Alternatives as determined by CBDT
Every business that enters into international trade and related business is required to maintain and maintain documents and information related to employment. In addition, businesses that enter into international service during the past year are required to obtain a report from the trustees and submit it together with the income tax return.
Any person who has been involved in international trade for the past year will submit a report to Form 3CEB using a Chartered Accountant, certified by him or her, on or before the date determined by the official, providing all the required information.
Profitability is a form of income, there is no escaping the application of transfer rules to determine capital gains, so that a clear consideration can be drawn if such a legal transfer value exceeds the value of the transaction.
Importing raw materials, semi-finished goods for integration and most importantly, intellectual property such as knowledge and technology are areas that tend to transfer prices. Such goods or services may be exported to companies affiliated to India at a higher or lower price than those charged by unrelated persons in order to protect the profits of international taxes.
In the age of high technology, Indian companies tend to rely on technology and knowledge from their partners in a foreign joint venture: so strict rules are very important.
In the age of high technology, Indian companies tend to rely on technology and knowledge from their partners in a foreign joint venture: so strict rules are very important.
The consequences of disobeying Indian transfer rules are as follows
- Case of under-reporting or non-reporting of income: Amount equal to 50% of the amount of tax payable for misreported income Amount equal to 200% of the amount of tax payable on under reporting income where the reported low income is the result of any inaccurate reporting
The entity is required to comply with the transfer price rules in which: The taxpayer has enter into international trade or a particular domestic business (within India) by associated business outside of India, (international service) or within India (of a particular domestic transaction).