Comment on the following independent situations, whether X Ltd. and Y Ltd. constitute associated enterprises under the provisions of Section 92A : Y Ltd. is engaged in trading of furniture. During the previous year 2020-

X Ltd. and Y Ltd. are not Associated Enterprise. As per section 92A of the Income-tax Act, 1961, two enterprises are deemed to be associated enterprises if 90% or more of the raw material required for the manufacture or processing of goods carried out by one enterprise, are supplied by the other enterprise. This clause is applicable only if the purchasing enterprise is engaged in manufacturing or processing of goods. In this case, Y Ltd. is not engaged in manufacturing or processing of goods and hence, X Ltd. and Y Ltd. do not qualify as Associated Enterprises.