Funds Transferred Between Related Parties

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This discussion addresses the tax implications of a trustee company mistakenly paying an expense invoice for a trust. The consensus is that the subsequent repayment from the trust to the trustee company is legitimate under taxation laws. While formal board ratification for the trustee company isn't strictly required as the funds were returned, it's advisable to inform the board of the transaction.

C.A. Sandeep Wawhal

C.A. Sandeep Wawhal (Querist)

25 October 2021 Dear Sir,
kindly advise us as to any tax implications in following transactions
1. we have a trustee company X and trust Y
2. trustee company is Pvt Ltd Co
3. we have received expense invoice from in the name of trust but payment made through trustee company by mistakenly
4. we have decided to trust will pay to trustee company same amount as trustee Co. has paid on behalf of trust.

Will it (funds transferred as per point no 4 above) legitimate as per taxation laws ?

Regards,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

25 October 2021 Yes, it's legitimate as per taxation laws.

C.A. Sandeep Wawhal

C.A. Sandeep Wawhal (Querist)

26 October 2021 Sir,

whether there is requirement of ratification in board report of trustee company (pvt ltd)

Regards,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 October 2021 No ratification required as money is received back.

C.A. Sandeep Wawhal

C.A. Sandeep Wawhal (Querist)

26 October 2021 sir money is received back but invoice mentioned the name of trust not company. but company has paid amount and recovered from trust. we have accounted invoice in trust and payment adjusted through adjustment entry between trust and trusty company. Still ratification nit required in the board meeting of trustee company ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

27 October 2021 Ratification not required but inform the board.

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