Accounting treatment

Ours is a Limited Company in India and has a joint venture in Saudi Arabia with share holding of 20%. The investment in the Joint Venture is shown as Investments in the Indian Company Books. The Joint venture company is a limited liability company. The company pays the taxes on the share profit of the indian company as per laws in Saudi. In the Balance Sheet of Joint Venture, a schedule for Share Holders funds i.e share capital and retained earnings shown separately between two companies at 80 : 20 and rest all schedules shows consolidated. Every year the joint venture company pays dividend and dividend reduces from the retained earnings. The indian company recognise this dividend as Dividend received from the Joint Venture and pays at normal income tax rates applicable to companies and claims the tax credit u/s 91 for the taxes paid by the Joint Venture on share of the profit of the indian company. This year the joint venture did not pay any dividend to the indian company. How the indian company shall recognise the taxes paid by the joint venture on share of profit of the indian company for the year and how do claim the taxes paid by the Joint Venture by the indian company. What is the accounting treatment for the above transactions in the books of indian company. 

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Replies (1)

Accounting entries possible only when the transactions completed. The dividend is not declared by joint venture as per your version, so no accounting entry.

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