Comparison of Section 162 "Meaning of associated enterprise." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....ng/compliance professionals. Effective date or decision date: Not stated in the document. Background & Scope Statutory hooks: Clause 162 is situated within "Special Provisions Relating to Avoidance of Tax" and defines "associated enterprise" for the Chapter. Contextually, the clause provides the definition required to apply other provisions in the Chapter (not reproduced here). The clause contains a general participation test (sub-section (1)), a non-exhaustive list of deeming situations (sub-section (2)), and an extension for specified domestic transactions (sub-section (3)). Definitions of terms used elsewhere (for example, "tax year", "specified domestic transaction") are Not stated in the document. The clause reserves to prescription ....

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....ses where certain provisions are applicable (sub-section (3)). Ingredients/elements: The clause is both descriptive (general participation) and deeming (specific quantifiable thresholds). The temporal qualification "at any time during the tax year" applies to the deeming list in sub-section (2). Interpretation Legislative intent and interpretive principles indicated by the text: The clause intends to capture both de jure and de facto relationships that may enable profit shifting or non-arm's-length transactions. The presence of quantitative thresholds (26%, 51%, 10%, 90%) signals legislative desire for objective tests where possible; simultaneous use of control, appointment and dependency criteria indicates a broad anti-avoidance sco....

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....al interest" relationships. The clause does not itself reference rules, notifications or circulars beyond the power to prescribe: Not stated in the document whether specific rules are in force or envisaged. Differences Between the Two Provisions and Practical Impact Comparison between Section 162 of the Income-tax Act, 2025 as presented in Document 1 and Clause 162 of the Income Tax Bill, 2025 (Old Version) as presented in Document 2 reveals the following material differences and likely practical impacts: * Structural consolidation of limbs: The Act version (Document 1) places several specific indicia of association (shareholding thresholds, loans, guarantees, appointments, dependence on IP, supply/purchase dependence, control by indivi....

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....or symmetric scenarios. * Practical impact: The Bill's framing may provide clearer symmetry between enterprises for appointment-based control tests and may reduce ambiguity about whether the test applies unilaterally or requires reciprocal appointment influence. * Residual clause wording and placement: Both texts include a residual "relationship of mutual interest" clause; Document 1 lists it as (l) in subsection (1), while Document 2 lists it as (m) in subsection (2). The substance is similar-both defer details to rules/prescription. * Practical impact: Substantive effect similar; placement difference aligns with the Bill's two-tier structure. * Subsection addressing specified domestic transactions: Both documents include a....

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.... making explicit directional tests (e.g., manufacture wholly dependent by one enterprise on the other in (2)(g) of Document 2). Both capture unilateral dependence scenarios but presentation differs. * Practical impact: Largely drafting; the Bill's sequential deeming points may assist interpretation when applied to asymmetric relationships. Practical Implications * Compliance and risk areas: The inclusion of objective thresholds (shareholding, loan/book value, guarantee percentage) creates bright-line tests that will trigger association and thereby application of the Chapter's anti-avoidance or transfer pricing provisions. Taxpayers must monitor shareholding percentages, loans relative to asset base, and guarantees. The broad ap....