Accounting tax effect on barter

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16 July 2012 a tv channel (a pvt.ltd.company) and a hotel (3 star hotel and a pvt.ltd. company) entered into a barter for exchange of advertising slots and hotel rooms, both for rs. 5 lakh each.

what are :-
1. accounting treatment
2. income tax & TDs
3. service tax effects.

my points of counter argument for thought
1. accounting can be ignored as its not a financial transaction (its a barter)

2. income tax/tds - not required as there is no payment at all. (194C applies only to payment)

3. service tax if considered, hotel will loose as input credit is restricted only to 60% (i.e. output liability).

irrespective of tax loss if any, please tell accounting and tax effect as per rules.

awaiting some reply,

mr.kunjan shah
9820750784
www.canaresh.com
mumbai

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)

17 July 2012 Where any sum is paid or credited for carrying out any work mentioned, tax shall be deducted at source
194C is applicable
Accounting treatment
effect will be nil but it will be proper to account them
following entries will be passed

at the time of Hotel making sale or provding Room Service

Adv.co a/c Dr
to Room Service or Sale

at the time of Adv co providing Service

Adv Exp. A/c Dr
to Adv Co.a/c

Entries are as per the records in the books of hotel

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