Associated Enterprises : 92A(1), 92A(2)(g)

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Piyush Gupta

student

31 Points Posted on 26 December 2018

In case of Hotel Industries the business model is like :
a. The person who has capital.

b. The person who knows how to run a hotel in profit.

So the person (a) invests money to build a hotel according to specifications of person(b)

And after building the hotel person(a) transfers the hotel management to person (b)

Now the query is:
If the person(b) is an Non resident Indian

And it received the management fees.

So does it comes in the purview of section 92A making a&b associated enterprises.

Specific Reference : Section 92A(1)
&
Section 92A(2)(g)

Replies (2)

Adinath Sardeshmukh.

Student

35 Points Posted on 26 December 2018

as per sec 92 there is a comprehensive list which specifies when the entities would be considered as AE. As far as I remember the above case won't be considered as AE merely as the other entity is managing the hotel. you can refer the list in the section and confirm the stand once

Piyush Gupta

student

31 Points Posted on 02 January 2019

Hey
Thanks for the reply

But my specific query is that as
Section 92A(1) specifies management as a factor for ensuring an enterprise as associated.
And
Section 92A(2)(g) specifies an entity with a "KNOW HOW" on which the business of another entity is based.

Now the problem is that for an enterprise to be associated both 92A(1) and 92A(2) should be satisfied.

But in above case the "KNOW HOW" on which the business of another entity is based is the "MANAGEMENT" which is a factor of 92A(1).
Therefore just due to a strange coincidence the above two entities became associated.

So I just needed a peice of advice as to how to avoid this coincidence.