24 November 2010
Dear All During the course of internal audit, i came across the following case
The company A Ltd - a manufacturing company based in Bangalore. A Ltd has a Joint venture entity in Bahrain called AB WLL, where they have an equity participation of 30%.
A Ltd has supplied goods to AB WLL. The JV company has not paid any money for the same and the outstanding is more than 4 yrs.
The statutory auditors has not commented anything, nor A Ltd has made any provision towards Bad Debts.
Request you to kindly clarify the implication from the FEMA, Direct and Indirect Tax point.
27 November 2010
Direct Tax - Since it is a JV writing off to bad debt may be questioned due to arms length issue. In any case, company management seems to be aware of this. (Is it reflecting in monthly debtors ageing report?). There could also be tax issues relating to transfer pricing since the goods are sold to JV
Indirect Tax & FEMA - I am unable to comment on this.
CAclubindia
