The “Banana Group” is based in Ecuador and is engaged in the business of exporting Ecuadorian bananas. The Japanese distributor was part of the Banana Group.
An Ecuadorian group company purchases bananas produced on plantations in Ecuador, exports and sells them to another intermediate group company, who in turn sells them to the Japanese distributor for wholesale in Japan.
At issue was the arms length price of the bananas imported by the Japanese distributor.
The tax administration held that the price paid for the bananas had been to high and issued an assessment for FY 1999-2004.
The Japanese company disagreed and brought the case to court.
Decision of the Court
The Tokyo District court decided in favour of the tax administration and upheld the tax assessment.