Section 92A of the Income-tax Act, 1961: Meaning of Associated Enterprise
An associated enterprise (AE) is an enterprise connected with another through participation in management, control or capital, including specified relationships based on shareholding, financing, governance, commercial dependence and common control. Section 92A of the Income-tax Act, 1961 sets out the definition and thirteen statutory tests relevant to Indian transfer pricing.
Definition under Section 92A(1)
For the purposes of sections 92, 92A, 92B, 92C, 92D, 92E and 92F of the 1961 Act, an enterprise is associated with another enterprise where:
- Section 92A(1)(a): it participates, directly or indirectly, or through one or more intermediaries, in the management, control or capital of the other enterprise; or
- Section 92A(1)(b): one or more of the same persons participate, directly or indirectly or through intermediaries, in the management, control or capital of both enterprises.
The definition addresses both a direct or indirect connection between two enterprises and common participation by the same persons in separate enterprises. The specific statutory deeming conditions are set out in section 92A(2).
Section 92A(2): Thirteen conditions for associated enterprises
For the purposes of subsection (1), two enterprises are deemed to be associated enterprises if any of the following relationships exists at any time during the previous year. The descriptions below explain clauses (a) to (m); consult the official statutory wording for application to a particular case.
| Provision | Condition and meaning |
|---|---|
| 92A(2)(a) | Voting power in another enterprise One enterprise directly or indirectly holds shares carrying at least 26% of the voting power in the other. |
| 92A(2)(b) | Common shareholder The same person or enterprise directly or indirectly holds shares carrying at least 26% of the voting power in each enterprise. |
| 92A(2)(c) | Substantial loan A loan advanced by one enterprise constitutes at least 51% of the book value of the other enterprise's total assets. |
| 92A(2)(d) | Borrowing guarantee One enterprise guarantees at least 10% of the other enterprise's total borrowings. |
| 92A(2)(e) | Appointment of directors One enterprise appoints more than half of the other enterprise's board or governing board, or one or more of its executive directors or executive governing-board members. |
| 92A(2)(f) | Common appointments The same person or persons appoint more than half of each enterprise's board or governing board, or one or more executive directors or governing-board members of each. |
| 92A(2)(g) | Dependence on intellectual property Manufacture, processing or business is wholly dependent on know-how, patents, copyrights, trademarks, licences, franchises, similar commercial rights or relevant technical information owned or exclusively controlled by the other enterprise. |
| 92A(2)(h) | Raw materials and consumables At least 90% of required raw materials and consumables are supplied by the other enterprise or persons it specifies, and that enterprise influences the prices and other supply conditions. |
| 92A(2)(i) | Sales of manufactured goods Goods or articles manufactured or processed by one enterprise are sold to the other enterprise or persons it specifies, and that enterprise influences the prices and other conditions of sale. The clause does not specify a minimum sales percentage. |
| 92A(2)(j) | Individual control and relatives One enterprise is controlled by an individual and the other by that individual, a relative, or the individual jointly with that relative. |
| 92A(2)(k) | Hindu undivided family One enterprise is controlled by an HUF and the other by an HUF member, a relative of a member, or a member jointly with that relative. |
| 92A(2)(l) | Interest in firm, AOP or BOI Where one enterprise is a firm, association of persons or body of individuals, the other enterprise holds an interest of at least 10% in it. |
| 92A(2)(m) | Prescribed mutual interest The enterprises have a relationship of mutual interest as may be prescribed. |
Examples of associated enterprises
Shareholding: If Company A holds shares carrying 30% voting power in Company B, the 26% test in section 92A(2)(a) is met. If Company P holds 30% voting power in both Company A and Company B, the common-shareholder test in clause (b) is met.
Loan: If an enterprise advances a loan of Rs. 60 crore to another whose total assets have a book value of Rs. 100 crore, the 51% loan threshold in clause (c) is met.
Commercial dependence: If at least 90% of a manufacturer's required raw materials and consumables are supplied by another enterprise or its nominees, clause (h) also requires influence over the prices and other supply conditions. The percentage alone does not describe the entire statutory test.
Corresponding law: Section 162 of the Income-tax Act, 2025
Section 162 reorganises the associated-enterprise definition for the new tax-year framework. Section 162(1)(a) covers participation by common persons and the 26% voting-power tests; clauses (b) to (l) address loans, guarantees, board appointments, intellectual property dependence, supply and sales arrangements, individual or HUF control, interests in firms or associations, and prescribed mutual interest.
Section 162(2) additionally specifies relationships treated as associated enterprises for certain specified domestic transactions, including identified units, undertakings, businesses and persons under the cross-referenced provisions. Its clause (c) was substituted by the Finance Act, 2026 with effect from 1 April 2026. Accordingly, the full current section 162 text, rather than section 92A alone, should be consulted for tax year 2026-27 onwards.
Why associated-enterprise status matters
Associated-enterprise identification is a foundational step in applying transfer-pricing requirements to covered international transactions and specified domestic transactions. Depending on the transaction and applicable law, these rules concern the arm's length price, documentation, accountant reporting and assessment by the Transfer Pricing Officer. Associated-enterprise status does not, by itself, establish that every transaction is taxable or requires an adjustment.
Official legal references
- Income-tax Act, 1961 - Section 92A: Meaning of associated enterprise
- Income-tax Act, 2025 - Section 162: Meaning of associated enterprise
- Income Tax Department - Income-tax Act, 2025 and transition resources
- Income Tax Department - Transfer pricing guidance
Updated: 7 October 2026. This article provides general statutory information; the relevant tax year, facts, rules and applicable judicial interpretation should be considered in individual cases.