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.

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• Associated Enterprise Status: Not applicable (the brother-in-law relationship between an individual shareholder and director does not create AE status without managerial or capital control).

• Form 3CEB & Section 92E Filing: Not required under current facts.

The relationship described does not, by itself, make the US customer an associated enterprise (AE). Under section 92A, the test is whether the statutory participation-in-management, control or capital conditions are met; a shared name, sole-customer status, cost-plus pricing or a relationship between an Indian director and a US shareholder is not, on its own, enough. A brother-in-law relationship is not one of the specified relationships that automatically establishes an AE. However, examine the actual shareholding and rights, board/management arrangements, financing, and any agreements or practical arrangements that could confer control or influence; the facts stated do not establish these.

• If the US company is an AE under section 92A, the cost-plus software-development transaction is an international transaction, and section 92E/Form 3CEB applies regardless of turnover or the transaction’s value.
• If it is not an AE and there is no other international transaction covered by section 92B (including a transaction with a non-resident that is deemed international under that section), section 92E/Form 3CEB is not triggered merely because the Indian company’s only customer is overseas.
• The >₹1 crore turnover and similar company names do not independently decide the AE or section 92E question. Document the ownership/control analysis and contract terms before concluding.

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