GROUP ASSIGNMENT 2 - Source of profit assignment Background a) Crystal Company was incorporated in Hong Kong and is a wholly owned subsidiary of Iron Company, a company incorporated in Switzerland. b) Iron is engaged in the retailing of fashion accessories mainly in European countries through its own outlets. It has appointed Crystal as its buying agent to procure overseas supplies and source goods in mainland China and other Asian countries such as Thailand, Malaysia and Vietnam. c) Due to the geographical location of overseas suppliers, Crystal has established many representative offices in various overseas countries to perform the procurement services for Iron. The representative offices do not have the authorities to negotiate, conclude or execute sales and purchases of Iron. The terms of sales and purchases are negotiated and concluded by Iron with the suppliers directly outside Hong Kong. Once the contracts are concluded, Iron will instruct the representative offices to follow up the orders with the suppliers. d) Crystal receives commission income from Iron for the procurement services rendered outside Hong Kong at 3% on the value of the purchase for Iron. e) Crystal does not employ any staff in Hong Kong. It has engaged Oily Company, its fellow subsidiary in Hong Kong as service agent to perform the necessary administrative functions and pays a service fee for the services rendered on a cost plus 5% basis. The case a) Crystal currently maintains a number of representative offices outside Hong Kong, two of which are located in Shanghai and Guangzhou to perform the procurement services in the mainland. b) Crystal is considering to setting up Aloe Company in the mainland with branches in Shanghai and Guangzhou to take over functions currently performed by the representative offices (mainly on the mainland). c) The Shanghai and Guangzhou representative offices of Crystal will be closed down completely subsequent to the start of operations of Aloe. The staff of the two representative offices now station in the mainland will be transferred to Aloe and work there. d) Crystal will enter into a service agreement with Aloe outside Hong Kong to engage Aloe to perform the procurement services in the mainland for Iron. Under the agreement, Crystal will pay a service fee to Aloe for the services rendered on a cost plus 3% basis. e) Crystal will continue to receive commission income from Iron on the same basis as before. f) Iron will continue to appoint Crystal as its service agent to perform the necessary administrative functions and will pay it a service fee on the same basis as before. Required: Provide an analysis to identify the source of Crystal's commission income with support from the relevant concepts, principles and cases if necessary. analysis to 350 words