TaxTMI 
TaxTMI 
RELATED PARTY TRANSACTIONS UNDER COMPANIES (COST RECORDS AND AUDIT) RULES, 2014
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....ELATED PARTY TRANSACTIONS UNDER COMPANIES (COST RECORDS AND AUDIT) RULES, 2014<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Corporate Laws / IBC / SEBI<br>Dated:- 14-3-2015<br><br>Form CRA-1 is to be maintained by the companies which are required to maintain cost records. The said form indicates what the particulars relating to the items of costs to be included in the book of accounts. Item No. 24 deals ....
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....with the related party transactions. Related party is defined as the related party as defined under Section 2(76) of the Companies Act, 2013. Section 2(76) of the Companies Act, 2013 defines the term 'related party' with reference to a company as- * A director or his relative; * A key managerial personnel or his relative; * A firm, in which a director, manager or his relative is a partner; ....
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.... * A private company in which a director or manager is a member or director; * A public company in which a director or manager is a director or holds along with his relatives, more than 2% of his paid up share capital; * Any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or mana....
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....ger; * Any person on whose advice, directions or instructions a director or manager is accustomed to act; * Nothing in the previous two clauses shall apply to the advice, directions or instructions given in a professional capacity; * Any company which is- * A holding, subsidiary or an associate company of such company; or * A subsidiary of a holding company to which it is also a subsidia....
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....ry; * Such other person as may be prescribed. Section 2(77) defines the term ' relative' with reference to any person, as any one who is related to another, if- * They are members of a Hindu Undivided Family; * They are husband and wife; or * One person is related to the other in such manner as may be prescribed. The term 'normal price' is under Cost Audit Rules as a price charged for co....
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....mparable and similar products in the ordinary course of trade and commerce where the price charge in the sole consideration of sale and such sale is not made to a related party. Normal price can be considered to be a price at which two unrelated and non-desperate parties would agree to a transaction and where such transaction is not clouded due to the proximity of the parties to the transaction an....
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....d free from influence though the parties may have shared interest. The basis adopted to determine normal price shall be classified as under: * Comparative uncontrolled price method; * Resale price method; * Cost plus method; * Profit split method; * Transactional net margin method; or * Any other method to be specified. In respect of related party transactions or supplies made or ser....
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....vices rendered by a company to a company termed 'related party relationship' and vice-versa, records shall be maintained showing contracted entered into, agreements or understanding reached in respect of- * Purchase and sale of raw materials, finished goods, rendering of services, process materials and rejected goods including scraps and other related materials; * Utilization of plant faciliti....
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....es and technical know-how; * Supply of utilities and any other services; * Administrative, technical, managerial or any other consultancy services; * Purchase and sale of capital goods including plant and machinery; and * Any other payment related to the production of goods or rendering of services under reference. These records shall also indicate the basis followed for arriving at the r....
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....ates charged or paid for such goods or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to goods or services under reference. Form CRA-3 is the format for the cost audit report. Along with the cost audit report annexure is to be enclosed. The annexure consists of 4 parts viz., Part A, Part B, Part C and Part D. Item No. 5 of the P....
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....art D deals with related party transactions for the company as a whole. The report for the same is produced as below: RELATED PARTY TRANSACTIONS (FOR THE COMPANY AS A WHOLE) Sl. No. Name and address of the Related party Name of the Product/Service Nature of Transaction (Sale, Purchase etc.,) Quantity Transfer Price Amount Normal Price Basis adopted to determine the normal price 1 2 3 ....
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.... 4 5 Note: 1. Details shall be furnished for each related party and product/service separately. Note :2. Details of related party transactions without indicating the Normal Price and the basis thereof shall be considered as incomplete information.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....