PF, ESIC statutory payments
This query is : Resolved
25 February 2008
One of our client(a company), hire sub-contractors for job work at diff sites.
to complete work of one site it takes four to five years (a long term contract)
Now client pays on behalf of sub-contractors statutory payments like ESIC , PF e.t.c. in his name & subsiquently he recoveres from sub-contractors statutory payments paid by him.
He meets statutory obligation always on time.
can client do such act?
What shall be effect in taxation? Shall be allowed as deduction , disallowed or treated as income?
What shall be my role as an auditor?
One of our client(a company), hire sub-contractors for job work at diff sites.
to complete work of one site it takes four to five years (a long term contract)
Now client pays on behalf of sub-contractors statutory payments like ESIC , PF e.t.c. in his name & subsiquently he recoveres from sub-contractors statutory payments paid by him.
He meets statutory obligation always on time.
can client do such act?
What shall be effect in taxation? Shall be allowed as deduction , disallowed or treated as income?
What shall be my role as an auditor?
25 February 2008
1. There is nothing wrong in your client remitting the PF, ESI, etc.,statutory dues on behalf of his subcontractors, as it is a very safe way to ensure no default on account of such payments.
2. As these are paid and recovered, there is no effect in the profit and loss account of your client. So where is the question of disallowance etc.?
3. Your role as auditor of your client as far as these payments are concerned, whether they have indeed been paid to those authorities and receipts obtained and have been properly recovered from the subcontractors and whether the subcontractor has acknowledged all those payments made on their behalf by your client.
2. As these are paid and recovered, there is no effect in the profit and loss account of your client. So where is the question of disallowance etc.?
3. Your role as auditor of your client as far as these payments are concerned, whether they have indeed been paid to those authorities and receipts obtained and have been properly recovered from the subcontractors and whether the subcontractor has acknowledged all those payments made on their behalf by your client.
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