Applicability of 92E and 3CEB

• The Indian company and US company have different shareholders, and there is no direct or indirect control, voting power, inter-company loans, or board appointments based on the facts stated.

• The only connection is the brother-in-law relationship between an Indian director and a US shareholder; however, “relative” under Section 92A covers some relationships, but “brother-in-law” is not specifically covered as a “relative” for control purposes in the context of transfer pricing. Unless there is actual influence over management or policy decisions, this relationship alone won’t make the companies AEs.​

• Merely having overlapping or similar company names or single-client concentration does not establish AE status unless accompanied by direct/indirect participation in management/control/capital.

• Section 92E and Form 3CEB become applicable when an international transaction is undertaken with an AE.​

• If, on facts, the companies are not “AEs” under Section 92A, transfer pricing documentation, Section 92E reporting, and Form 3CEB are NOT required, even if the US company is the sole client.

• Indian tax authorities may scrutinize single-client captive models, so robust documentation demonstrating arm’s length transactions is advisable.
• Based on current facts, the US company does NOT qualify as an AE to the Indian company under Section 92A, so 92E and Form 3CEB do NOT apply at present.

Many thanks Sir, this is very helpful.

You are welcome.