Comment on the following independent situations, whether Jack Ltd. and Jill Inc. constitute associated enterprises under the provisions of Section 92A of the Income Tax Act, 1961: (i) Jill Inc. has advanced a loan of ₹30

As per section 92A of the Income-tax Act, 1961, two enterprises are deemed to be associated enterprise, if at any time during the previous year, the loan advanced by one enterprise to another enterprise constitutes not less than 51% of book value of the total asset of the other enterprise. Jill Inc., a foreign company, has advanced a loan of ₹30 crores to Jack Ltd., a domestic company, which amounts to 60% (30 crore x 100/ 50 crore) of the total book value of assets of Jack Ltd. Since the loan advanced by Jill Inc. is not less than 51% of the book value of the total assets of Jack Ltd., Jack Ltd. and Jill Inc. are deemed to be associated enterprises for the purpose of transfer pricing regulations. The deeming provisions would be attracted even if there is a repayment of loan during the same previous year which brings down his percentage below 51%. Therefore, Jack Ltd. and Jill Inc. are Associated Enterprise.