Related person test: familial links among directors do not automatically make firms related; valuation rule not attracted.

Whether two entities qualify as related persons for Rule 9 valuation was examined by reference to the related person test: the Tribunal applied principles requiring mutuality of interest, interdependence beyond mere familial ties, and a demonstrable effect on price caused by extra commercial consideration; it also treated the company law concept of 'relative' as applicable only to natural persons and not automatically extending to corporate or firm entities because related individuals are involved. Applying these principles to the recorded facts, the Tribunal found no legal basis to treat the partnership and the company as related persons and disapplied Rule 9.

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Issues: Whether the appellant company and M/s AETC (a partnership firm) are related persons such that Rule 9 of the Valuation Rules is attracted.

Analysis: The Tribunal examined the constitution and interrelationships of the appellant (a public limited company) and the partnership firm including familial connections among directors and partners, and compared transaction volumes with independent parties. Relying on established precedents, the Tribunal applied the legal principles governing "related" persons and "relative" as derived from company law and valuation jurisprudence, including the requirement of mutuality of interest, interdependence beyond mere family ties, and an effect on price (i.e., price charged being lower than normal due to extra commercial consideration). The Tribunal held that the concept of "relative" under company law applies to natural persons and does not automatically extend to impersonal corporate or firm entities merely because some partners or directors are related individuals. Applying these principles to the facts, the Tribunal found no legal basis to treat the partnership firm and the company as related persons for the purpose of Rule 9.

Conclusion: The appellant and M/s AETC are not related persons; Rule 9 of the Valuation Rules does not apply. The impugned order is set aside and the appeal is allowed with consequential relief, if any.

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