Need one urgent help on pricing mechanism (within India).
There are two companies 'A' & 'B' in India. Both form a JV company 'C' (JV Company 1) on 50:50 basis. Both companies (A&B) are listed on stock exchanges and are Public Companies.
'A' and 'C' form another JV Company 'D' (JV Company 2) with equity particpation of 51% or more upto 76% by 'C' Company and balance equity shareholding to be held by 'A'.
Company 'D' produces a product. Product Market price is Rs. X and cost price is Rs. X/3. Now we are plannning to Transfer materail from Company D to Company C at a price of (Cost+5% or X/3 * 1.05) on long term basis say for 25 to 30 years. Is this price mechanism possible/sustainable in the long term, keeping into consideration the present and imminent laws (DTC 2012 included).
Facts: Company A, B, C, D are all in India and C, D are in same state but A and B are in different states.
further more take in to account t fact that direct tax code section 123 gives tremendous power to tax officer to question these type of trasaction. and obvisously revenue loss to state od company D can be questioned?
Please let me know expert views asap.
CAclubindia
