12 November 2008
I would like to have your kind opinion related to accounting issue while capitalising items for construction of a buliding in case of subsidiary where due to tax, admn. and finance reasons the road permits,bills etc.are made in name of Holding company.
In that scenrio, the subsidiary cannot capitalise for want of bill and holding company has no valid right for capitalisation also.Please give opinion what type of accounting / Contractual arrangemt be made between holding and subsidiary which are in financial and tax interest also.
12 November 2008
The subsidiary company can enter into an agreement with holding company stating the arrangement and that the subsidiary company will reimburse the claim by holding company in this regard. Based on the reimbursement claim and the agreement, subsidiary can capitalise. But the problem here could be one of service tax liability on business support to subsidiary by Holding company. AS I do not know the circumstances which warrants such an arrangement by subsidiary wuth holding company, I am unable to comment on that aspect.
CAclubindia
