Sale invoices

This query is : Resolved

sankar ponnan (Querist)
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26 June 2020 SIR
A Pvt Ltd Co. namely X providing its own trucks to the business of transport services and issues sale invoices to the party for services rendered.

On the other part, X takes trucks from Y , who also provider of transport service, for hiring and use them to its own business?

Similarly, Y takes trucks from X for hiring?

Finally X has issued sale invoices to Y and Y also has issued its sale invoices to X for hiring of trucks.

Here, Directors for both X and Y are the same.

Is this process correct?
Sale invoice to be acceptable ?
Applicability of TDS if any?
Any contractual agreement needed?

Thanks in advance

Punit Gupta

Punit Gupta (Expert)
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26 June 2020 1. Prima Facie, There is nothing wrong in the process as such. There can be multiple businesses being managed/owned by same group of persons.
But at certain point of time, there can be some legal consequences in case of any mala fide business practices causing non compliance to the governing laws may lead to legal problems to both the companies.

2. Yes, Sales Invoice, with proper taxation, if any, to be issued and accepted by both the parties.

3. Applicability of TDS shall be governed by the instances crossing threshold of the payments to other party under governing provisions of Income Tax and GST laws.

4. No specific Contractual formality is needed, as it seems routine business operation. But to give a legal stand, the parties may enter into such Contract defining extents and to safeguard own interest under such routine business operations.