Advance by a foreign parent to indian subsidiary
This query is : Resolved
28 May 2018
A Ltd. a subsidiary of X Ltd. (German MNC) has received a payment of Rs. 96.60 lacs from X Ltd. for Research & Development expenditure. Out of this 96.60 lacs actually only 50.60 lacs as payable but due to some mistake in invoicing, X Ltd. has made an excess payment of 46 lacs to its indian subsidiary.
The payment was received in two tranches i.e. August 2016 - 46 lac & October 2016 - 50.60 lacs.
Now in February 2018 X Ltd. has demanded a refund of excess money.
So what all compliance are required to refund the money. For e.g. RBI/FEMA / FDI/ODI /FCGPR/Companies Act etc.???
Is there any rate of interest to e paid or any time limit??
Thanks
Shubham
The payment was received in two tranches i.e. August 2016 - 46 lac & October 2016 - 50.60 lacs.
Now in February 2018 X Ltd. has demanded a refund of excess money.
So what all compliance are required to refund the money. For e.g. RBI/FEMA / FDI/ODI /FCGPR/Companies Act etc.???
Is there any rate of interest to e paid or any time limit??
Thanks
Shubham
28 May 2018
If invoice was raised by you for correct amount then for the excess payment received you must have made accounting entry as advance received for service to be provided and you must have informed the bank for receipt of advance. Now, you take a letter from the customer for cancellation of contract and demand of refund of balance. With the help of this letter, you shall be allowed to remit the money to your customer.
Message likes :
1 times
28 May 2018
Hello Sir. Thanks for replying.
Actually the issue is that it was agreed between two companies that whatever invoice will be there it would be subject to an escalation of 10% to comply with Arms length provisions, but the indian company forgot to add 10% escalation and raised an invoice of 46 lakhs only.
But in October 2016 the issue popped up and the company again raised an invoice of 50,60,000 (this included 10% escalation). Although we have mentioned that only the difference should be paid i.e. 50,60,000 - 46 lakhs = 4,60,000, but the German company paid full 50,60,000 inadvertently.
So we were entitled to receive 50,60,000 but we have received 96,60,000.
Now they are demanding refund after 18 months.
So what is the compliance?
Actually the issue is that it was agreed between two companies that whatever invoice will be there it would be subject to an escalation of 10% to comply with Arms length provisions, but the indian company forgot to add 10% escalation and raised an invoice of 46 lakhs only.
But in October 2016 the issue popped up and the company again raised an invoice of 50,60,000 (this included 10% escalation). Although we have mentioned that only the difference should be paid i.e. 50,60,000 - 46 lakhs = 4,60,000, but the German company paid full 50,60,000 inadvertently.
So we were entitled to receive 50,60,000 but we have received 96,60,000.
Now they are demanding refund after 18 months.
So what is the compliance?
28 May 2018
Please mail copy of both the invoices
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Reopen of assessment proceeding
- TDS on Consultancy- Non DTAA
- Depreciation of fixed assets- coop housing society in mumbai
- COMMERCIAL INVOICE FOR MATERIAL AND FREIGHT
- Reprocessing of rectification order AY 2025-26
- FTS Taxable under 115A
- Gift Received from nonblood relative
- EXPORT BILL UNDER LUT FREIGHT CHARGE INCLUED IN INVOICE IT LIABLE TO TAX
- Rental income gst and it purpose
- Tax Audit u/s 44AB for Transport Business A proprietorship is engaged in transportation business and
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
