Valuation

[Snehal Kulkarni]

Suppose, ABC is one of the Group Companies who manufactures the Electric Goods which are tailor-made in nature and manufacture as per the end user's requirement . Under this ABC company, there are many subsidiary, associate Companies and also have some Joint Ventures. This ABC is getting Orders from group companies as well as subsidiary/associate/JV companies. Also from the independent buyer. Kindly guide us on the Type of Valuation to be adopted for Subsidiary/Associate/JV & group companies

[Rama Krishana]

In general in taxation instead of the term "group companies" the concept, "related parties" or "associted parties" are being used. Under differnent tax laws differnt valuation methods have been prescribed. For an example, under central exicse, Rule 9 and Rule 10 of the Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 provide methods of valuation when sale is made to related parties or through interconnected undertakings.

[NANDKUMAR SAGWEKAR]

This is a related party transactions I think value for the purpose should 110% of Cost of Production as per CAS 4 issued by Institute of Cost and Works Accountants of India

AI Summary

Related party valuation: apply Central Excise valuation rules for interlinked sales; CAS guidance recommends a markup over cost.
The issue concerns valuation of tailor-made goods supplied to group companies, subsidiaries, associates and JVs, treated as related party transactions. Tax law applies specific valuation methods for such intra-group sales: under Central Excise, Rules 9 and 10 prescribe valuation for sales to related or interconnected undertakings. A practitioner view cited recommends a cost-based approach consistent with CAS 4, applying a markup on cost of production for related-party pricing. Different tax laws may, however, prescribe differing valuation methodologies.