And remember you have to agree BEFORE the flight who is to be PIC. You can't decide in retrospect how to log it depending on how the flight goes.
So where in the ANO is this written? It is good practice not Law.
What the ANO does say is:
Particulars of each flight during which the holder of the log book acted either as a member of the flight crew of an aircraft or for the purpose of qualifying for the grant or renewal of a licence under this Order, as the case may be, shall be recorded in the log book at the end of each flight or as soon thereafter as is reasonably practicable, including:
(c) the capacity in which the holder acted in flight;
The FI is PIC by virtue of JAR-FCL1.080(c)(iii) and has the right to intervene.
The pilot being checked is acting as a crew member because he is flying the aeroplane, if he acts solely as the PIC and no instruction is given, i.e. he makes all the decisions and acts as PIC there is nothing legally to prevent him logging it as P1S provided the FI endorses the log book. It is after all a fair discription of his operatig capacity required under Art 35.
This case is not documented anywhere, LASORS is nothing more than guidance and the CAA are not likely to produce a Pink because it has no safety implications and, they have no interest in what you put in your log so long as it meets the requirements of Art 35.