Q33. Who are related persons? ­

 

Ans: Article 15 of the ACV defines related persons. Persons are deemed to be related only if:  ­

●    they are officers or directors of one another's businesses;

 

●    they are legally recognised partners in business;

 

●    they are employer and employee;

 

●    any person directly or indirectly owns, controls or holds 5 per cent or more of the outstanding voting stock or shares of both of them;

 

●    one of them directly or indirectly controls the other:

 

●    both of them are directly or indirectly controlled by the third person:

 

●             together they directly or indirectly control a third person or:

 

●    they are members of the same family.

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Q34. Does the term “persons” include legal persons?

 

Ans: Yes.

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Q35. Can sole agents, sole distributors and sole concessionaires be deemed to be related?

 

Ans: No, unless they satisfy one of the definitions above, they cannot be considered as related.

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Q36. When can a person be deemed to control another?

 

Ans: A person can be deemed to control another when the former is legally or operationally in a position to exercise restraint or direction over the other.

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Q37. Who can be considered as members of same family?

 

Ans: The ACV contains no guidelines in regard. However, subject to domestic laws of importing country, the following can be considered members of the same family:

    

●       husband and wife

●    parent and child

●    brother and sister

●      brothers

●    sisters

●      grandparent and grandchild

●    uncle and nephew

●    uncle and niece

●    aunt and nephew

●    aunt and niece

●       brothers-in-law

●       sisters-in-law

●       brother-in-law and sister-in-law

●    parent-in-law and child-in-law.

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Q38. Can the transaction value be accepted a the customs value in a sale between related persons?

 

Ans: Normally, the transaction value can be accepted as the customs value provided the buyer and the seller are not related. However, transaction value between related buyer and seller can be accepted:

 

(i)   if the circumstances of the sale have been examined and it is found that the relationship did not influence the price; or

(ii) if the importer demonstrates that the transaction value closely approximates one of the 'test' values.

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Q39. What are ‘test’ values?

 

Ans: The ‘test’ value can be either the transaction value of identical or similar goods in sale to unrelated buyers in the importing country or the deductive value or computed value for identical or similar goods. The 'test' values are to be used at the initiative of the importer and are not to be used as substitute values. The transaction value itself has to be accepted as customs value so long as it closely approximates one of the ‘test’ values.

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Q40. What are transfer prices?

 

Ans: Recent trends in world trade show increasing international transfer of goods between trans-national companies (TNCs) and their overseas affiliates and branches. Prices indicated for such transfer of goods are known as transfer prices. Transfer prices should be determined using any of the recognised methods in such a way that it is acceptable to customs and tax authorities in both the importing and the exporting countries.

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Q41. Can transfer prices be accepted as customs value?

 

Ans: When there is a transfer of goods between a TNC and its overseas branch having no separate legal status of its own, such a transfer cannot be termed as a sale. Therefore, the transfer price in such a case cannot form a basis of valuation under the transaction value method and consequently, valuation has to be done using another method. In the case of a sale of goods between a TNC and its overseas affiliate having a separate legal status, it is likely that the sale would be in the nature of a related party transaction and should be treated as such.

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