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Gds pur in pvt ltd co and same gds sold through prop firm ?

CA Abhishek Singh (practice)     23 August 2013

CA Abhishek Singh
 35 likes  2060 points

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Mr. X is a sharedholder(50% share) and MD of ABC pvt ltd.


He also has a proprietorship business in the name of XYZ & CO


during the fy 12-13 ABC pvt ltd has purchased goods worth rs.20 lacs and the same goods has been sold through the XYZ & CO.


due to this XYZ & CO is showing higher profit by rs.20 lacs  (only sales no purchase) and ABC pvt ltd is showing loss (only pur and sale through XYZ & CO)


Now i am the auditor of the company and proprietorship firm.

I am left with two option 1. in the books of XYZ & CO (credit ABC pvt ltd - rs.20 lacs) and show the same as sales in ABC pvt ltd  or

2. show sales by ABC pvt ltd to XYZ & CO at cost Rs.20 lacs) which option is better.


i think in 1st case deemed dividend will get attracted and in 2nd case related party transaction ? which is the best option ? 


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