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4. Requirements for the Selection of Methods and Value of the Various Methods

89. The Ordinances in force do not lay down any rules for the application of one or another method. The authorities have perfect liberty in selecting any method of apportionment. Foreign concerns may not demand the application of a certain method. However, as the Company-Tax Ordinance requires foreign concerns to keep their books in such a way as to show the East Indian profits, the authorities first examine the separate accounting. They will only deviate from this method when they find that the figures actually fail to show clearly the profits made by the enterprise in N.E.I., or when this method is precluded by the nature of the business. The Ordinance makes an exception only for insurance companies which may choose between separate accounting and fractional apportionment (see paragraph 33).

90. It cannot be said positively which method is considered the most practical and satisfactory from the viewpoint of normal use and of prevention of tax evasion, because the circumstances of one concern will point to one method, and those of another concern to a different one, or even to a combination of various methods. Generally speaking, it may be stated that, for the great agricultural and mining concerns, it is possible to arrange their accountancy in this country in such a way that the figures give a clear idea of the financial results. At the same time, it will be necessary to verify the branch accounts in the light of annual accounts, invoices and compensation accounts of the head office, and, as a rule, this can easily be done. The export and import concerns present the real difficulties, and there is a growing tendency to fix the Indian profits at a certain portion of the total result.

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