TaxTMI 
TaxTMI 
Valuation
06 Sep 2010 
2 Replies 
1131 Views Asked by
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. (AI Summary)
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. (AI Summary)
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