Income booked in UK & costs booke in India

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 February 2010 One company registered in India having a branch in UK. UK Branch is booking the income for services given to UK clients and cost for the corresponding invoices is booked in India. Now in UK the cost portion is very negligent compared to its income so heavy tax can be borne in UK on income, so in this consequences how can that Indian Company meet the tax implications in Indian govt??

M Prabhakar Menon

M Prabhakar Menon (Expert)
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03 March 2010 One of the basic principles followed in accounts all over the world is the matching principle. Matching expenditure with income. Please follow this principle and clear the confusion caused.this universal rule is followed in taxation also. The proper thing to do is to operate a Head Office A/c in the books of the Branch and a corresponding Branch A/c in the Head Office books in the currency of the respective end user.The use of a Foreign currency fluctuation A/c will take care of exchange rate differences. Pl ref to Accounting Standards prescribed by ICAI in this regard.