LLP Entity A (bigger company) has been working with Proprietorship Entity B (smaller company) since a very long time. Both companies have very good relations.
Proprietorship entity B is a small company and is looking to hire people. A says to B, "Hey, let us help you now. We'll pay your employees salaries." and wishes to help pay the salaries of the individuals that they hire. So, A will send money to B via NEFT and B will give it turn give it to the employees that it hires. As additional detail, B is an IT service provider company.
Questions/Queries:
1) What is the best tax-saving legal way for A to transfer money to B in such a scenario?
2) If A transfers money via NEFT, B needs to add service tax to the gross amount. Can A do the necessary adjustments (deduction) as they are paying service tax to B?
3) What is the nature/category of payment that A will make to B? How should B accept and categorize such a payment?
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