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Union of India - Section

Section 26 in The Cost Accounting Records (Petroleum Industry) Rules, 2002

26. Inter Company Transactions. - (1) In respect of related party transactions or supplies made or services rendered by a company to its holding company or subsidiary or a company termed "related party relationship" as defined below and vice-a-versa, records shall be maintained showing contracts entered into, agreements or understanding reached in respect of:

(a)purchase and sale of raw materials, finished products, process materials, chemicals and rejected goods including scraps, etc;(b)utilisation of plant facilities and technical know-how;(c)supply of utilities and any other services;(d)administrative, technical, managerial and/or any other consultancy services;(e)purchase and sale of capital goods including plant and machinery;(f)any other payment related to production, processing or manufacturing of product under reference.These records shall also indicate the basis followed for arriving at the rates charged or paid for such products or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to product under reference.
(2)The transactions by the following "related party relationships" shall be covered under sub rule (1): -
(a)enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting enterprise (this includes holding companies, subsidiaries and fellow subsidiaries);
(b)associates and joint ventures of the reporting enterprise and the investing party or venturer in respect of which the reporting enterprise is an associate or a joint venture;
(c)individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual;
(d)key management personnel and relatives of such personnel; and
(e)enterprises over which any person described in (c) or (d) is able to exercise significant influence. This includes enterprises owned by directors or major shareholders of the reporting enterprise and enterprises that have a member of key management in common with the reporting enterprise.
However, the following shall not be deemed as "related party relationships": -
(a)Two companies simply because they have a Director in common, notwithstanding paragraph (d) or (e) above (unless the Director is able to affect the policies of both companies in their mutual dealings);
(b)a single customer, supplier, franchiser, distributor, or general agent with whom an enterprise transacts a significant volume of business merely by virtue of the resulting economic dependence; and
(c)the parties listed below, in the course of their normal dealings with an enterprise by virtue only of those dealings (although they may circumscribe the freedom of action of the enterprise or participate in its decision-making process);
i. providers of finance;ii. trade unions;iii. public utilities;iv. Government departments and Government agencies including Government sponsored bodies.Explanations: - for the purpose of these rules, -
(a)"related party relationships" means parties who are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions;
(b)"related party transaction" means a transfer or resources or obligations between related parties, regardless of whether or not a price is charged;
(c)"control" means (i) ownership, directly or indirectly, of more than one-half of the voting power of an enterprise; or
(ii)control of the composition of the Board of Directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise; or
(iii)a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the enterprise;
(d)"Significant influence" means participation in the financial and/or operating policy decisions of an enterprise, but not control of those policies;
(e)"an Associate" means an enterprise in investing reporting party has significant influence and which is neither a subsidiary nor a joint venture of that party;
(f)"a Joint venture" means a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control;
(g)"joint control" means the contractually agreed sharing of power to govern the financial and operating policies of an economic activity so as to obtain benefits from it;
(h)"key management personnel" means those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise;
(i)"relative" means in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be connected by blood relationships;
(j)"holding company" means a company having one or more subsidiaries;
(k)"subsidiary" means a subsidiary within the meaning of Section 4 of the companies Act, 1956 (1 of 1956);
(l)"fellow subsidiary" means a company is said to be a fellow subsidiary of another company if both are subsidiaries of the same holding company;
(m)"state-controlled enterprise" means an enterprise, which is under the control of the Central Government or State Government.
Proforma 'A'Name of the Company:..................................................................................Statement showing the cost of Utilities like (1) Water (2) Power etc. produced or consumed during the year/period:................................................................I Quantitative Information:
Serial Number Particulars Unit Current year Previous year
1. Installed capacity      
2. Quantity produced      
3. Capacity utilisation (%)      
4. Quantity re-circulated      
5. Quantity purchased, if any      
6. Self consumption including losses (to bespecified)      
7. Net units available      
II Cost Information:
Serial Number Particulars Quantity Rate per unit (Rs.) Amount (Rupees in lacs) Cost Per Unit
Current Year(Rupees) Previous Year(Rupees)
A 1. Materials or Chemical (specify)(a)(b)(c)          
2 Utilities (specify)(a)(b)(c)          
3 Wages and Salaries          
4 Consumable Stores and Spares          
5 Repairs and Maintenance          
6 Depreciation          
7 Other DirectExpenses, If any          
8 Other Overheads          
9 TOTAL          
10 Less: Credit, if any          
11 Net Total          
B. Apportioned to cost centre or activity1234. etc.          
Notes: - 1. Separate cost sheet is to be prepared for each major utility having significant impact on cost, whenever such utility is functionally independent and not forming part of composite unit.