State with reasons, whether Jackson LLC., (incorporated in Japan) and Vijayshree Ltd. a domestic company, are/can be deemed to be associated enterprises for the transfer pricing regulations in the following independent s

As per Section 92A(2)(c) of the Income Tax Act, 1961, two enterprises are deemed to be associated enterprises if one enterprise advances a loan to the other enterprise, and the amount of such loan is 51% or more of the book value of the total assets of the borrower enterprise. In this situation, Jackson LLC has advanced a loan of ₹55 crores to Vijayshree Ltd. The total book value of assets of Vijayshree Ltd. is ₹100 crores. The percentage of the loan advanced to the book value of total assets is (₹55 crores / ₹100 crores) * 100 = 55%. Since the loan advanced by Jackson LLC (55%) is not less than 51% of the book value of assets of Vijayshree Ltd., Jackson LLC and Vijayshree Ltd. are deemed to be associated enterprises for the purpose of transfer pricing regulations. The deeming provision would be attracted even if there is a repayment of loan during the same previous year which brings down its percentage below 51%.