is this steps permisisible

Tax queries 622 views 2 replies

s.lohani

Final student

1050 Points Posted on 27 February 2009

Suppose there are a husband and wife. Husband is a service provider(taxable service) and wife is a housewife. Suppose; if his wife gets a PAN card and the couple each establishes a Single proprietary firm for consultancy. Now; Mr A says his client to make the cheque (payment of the services he will give)in the name of his wife's firm; but it is Mr A who is giving the services. On paper he says it is his wife; whose firm is the service provider.Till now say Mr A's gross turnover is merely 14lac p.a. He is doing this thing just that the turnover of each firm doesn't exceeed 10 lac so he doesn't pay the service tax. In case of Income taxes; both of them individual records. In previous case, Mr A could only claim Rs 1 lac for payment of House loan under deduction; but now the couple will be able to claim 2 lacs for the same loan as the house is jointly owned by them. Is this allowed or made possible under Service Tax Rules as well as IT Act 1961.

Replies (2)

Abhinav Agarwal

M.Com C.A SAP Consultant

814 Points Posted on 27 February 2009

Service receipient will issue cheque in the name who has billed. If invoice is raised by wife's firm and actual service is rendered by husband's firm, there is no harm provided you claim some expenses also in wife's firm and such is acceptable to client. If invoice(bill) is raised by husband's firm, client will not issue cheque in wife's name. Better, if its possible, break the services into some parts and enter into a contract with client seperate seperate.

Sachin

Chartered Accountant

419 Points Posted on 27 February 2009

Originally posted by :sushant lohani
"	Suppose there are a husband and wife. Husband is a service provider(taxable service) and wife is a housewife. Suppose; if his wife gets a PAN card and the couple each establishes a Single proprietary firm for consultancy. Now; Mr A says his client to make the cheque (payment of the services he will give)in the name of his wife's firm; but it is Mr A who is giving the services. On paper he says it is his wife; whose firm is the service provider.Till now say Mr A's gross turnover is merely 14lac p.a. He is doing this thing just that the turnover of each firm doesn't exceeed 10 lac so he doesn't pay the service tax. In case of Income taxes; both of them individual records. In previous case, Mr A could only claim Rs 1 lac for payment of House loan under deduction; but now the couple will be able to claim 2 lacs for the same loan as the house is jointly owned by them. Is this allowed or made possible under Service Tax Rules as well as IT Act 1961.	"

Dear Sushant,

It is the part of Tax Planning and for it, various other aspects are considered. if do you know about this. please write the mail to me with full detail sachinagarwalcallb @ gmail.com