Transaction with the group of units under same management.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2010 Suppose ABC Ltd,a public limited company raise a bill including service tax on a society/trust controlled by the same management.In the book of ABC Ltd it was booked as Income as well as in the book of the society/trust it was shown as expenses.
Since no payment was made by the Society/Trust against such bill,service tax no yet to payable to Govt. by ABC Ltd. and such bill amount laying in the books of ABC Ltd as receivable over one year. Practically such transaction was made to reduce huge profit of Society/Trust. Whether act of the management is correct? Is there any specific circular or notification from service tax authority to prevent such loss of revenue?

Shyam Lal Naik

Shyam Lal Naik (Expert)
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08 June 2010 Please refer to Explanation to Rule 6 (1) of the Service Tax Rules, 1994.

In case of transaction between associated enterprise, tax liability arises on making entries in the books of account. Liability would arise in the month/qtr in which the bill is booked in the books of ABC Ltd.

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