Subsidery Company
This query is : Open
30 March 2009
I am working in a wholly owned subsidery which is wholly owned by a foreign company. We bill for them for the services provided. How do we account for the remittance received 1) Income 2) Inter-company transaction. 3) If "Income" are any taxes applicable on the Income received 2) If Intercompany then how to record those transations ? Please explain
CA. Amit Daga
(Expert)
30 March 2009
Indian company is separate entity and foregin company is separate entity . So you need to follow the normal procedure and record all transaction in the arms length price and apply all the normal provisions
30 March 2009
Means I cant show the income as an intercompany transaction. It has to be treated like an Income. Does this Income attract TDS?- can any expert guide me on same.
31 March 2009
Kindly under stand the meaning of Inter company transaction. The Transaction between the group company or between Holding & Subsidiary is called Inter company transaction. The transaction can be a Sales or Expenses.
In ur case ur company providing the service to Holding company , at the time of billing u have to recognize the revenue (i.e Income) by passing the following entry,
Holding Company A/c Dr
To Income A/c
At the time of receiving the remittances u have to pass the entry
Bank a/c Dr
Holding Company A/c
The above transaction is called Inter company transactions.
Please ensure the Remittance received through the Foreign Remittance Inward Certificate (FIRC)
These transactions will attract Transfer pricing under Income Tax. Ask ur client whether he is having the sufficient evidence to substantiate the rate at which he has billed. Because at the time of Scrutiny under Transfer Pricing, client has to give proper working that, his margin is in the industry level.
U have to provide form 3CEB at the financial Year end.(March 31)
2. Kindly ensure whether they have registered under any exempted sec under Income Tax Act
In ur case ur company providing the service to Holding company , at the time of billing u have to recognize the revenue (i.e Income) by passing the following entry,
Holding Company A/c Dr
To Income A/c
At the time of receiving the remittances u have to pass the entry
Bank a/c Dr
Holding Company A/c
The above transaction is called Inter company transactions.
Please ensure the Remittance received through the Foreign Remittance Inward Certificate (FIRC)
These transactions will attract Transfer pricing under Income Tax. Ask ur client whether he is having the sufficient evidence to substantiate the rate at which he has billed. Because at the time of Scrutiny under Transfer Pricing, client has to give proper working that, his margin is in the industry level.
U have to provide form 3CEB at the financial Year end.(March 31)
2. Kindly ensure whether they have registered under any exempted sec under Income Tax Act
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