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Related Company Transaction

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(Querist)
23 February 2010 we are having two private ltd co. one is having 50:50% partnership and one is complete our holding .

now our complete holding co. is opening a new hotel and on deputation basis we a 50:50% partnership concern is sending our employees on deputation basis for certain period.

for this period we bill thier entire salary component on prorata basis to complete holding co and accordingly take the per diem charges from them and pay to concerned employees.

please advice is there any law applicable to the above case, whether in corporate law or income tax.
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Rasesh

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Rasesh (Expert)
23 February 2010 I presume you are not acting as a labour supply contractor. If you are acting as a labour supply contractor, then rules pertaining to PF, ESI, service tax would be applicable.

Under corporate law, the transaction has to be recorded in the register maintained under SEctio 301. This also has to be disclosed under AS-18.

Under Income Tax, there would be no problem so long as the transaction is done at arms length basis.
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