Related Party Transaction

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Querist : Anonymous

Querist : Anonymous (Querist)

12 August 2010 Whether following is covered by related party transaction to be reported in Notes to Accounts?

An Indian Pvt Ltd. Company is subsidiary of Canadian Company and its directors are also in Canada. The Co is managed by a person designated as Country Head of the Indian Co. Such a person is also a director of domestic co. Whether the transactions between these companies(subsidiary & domestic) are liable for related party transaction.

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12 August 2010 As per AS 18,parties are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions.

In the given example the country head of the subsidiary of the Canadian Company is also the Director of another Domestic Company.Hence these are (subsidiary & Domestic) are related parties.

Querist : Anonymous

Querist : Anonymous (Querist)

13 August 2010 Should the above transaction be liable for section 40A(2)?

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CA SMR

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14 August 2010 As per the following sub-clause Sec 40 A(2) is applicable.
Sec 40 A (2)(v) A company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member;