Tax liability of subsidiary company

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amar preet singh (Querist)
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16 January 2012 sir i have an query that my client is director of the company running a pvt. ltd. company in India since 2008 with object of the company is to developing software . in the financial year 2009-10, 99% of shareholding of the company has purchased by u.s.a. based company therefore my company becomes subsidiary company of u.s.a. based company and the status of my company has convert non- residence company in India. Now the u.s.a. based company has received contract in u.s.a. to developing software and he has transferred funds to its subsidiary company in India to developing the software because the manpower cost is cheapest in india. my query is :-
1. the fund transfered from u.s.a. based company to its subsidiary company is income of the subsidiary company
2. is any tax liability will payable by subsidiary company in india on funds received from holding company
3. is there nay liability of giving service tax

Vishal D Shah

Vishal D Shah (Expert)
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17 January 2012 If the funds have come as a loan then same shall be considered as ECB & all conditions relating to ECB shall be applicable to such funds.

If the funds are only for developing software, it could be treated as advance for export of software as a current account transaction. Taxability shall be dependent on terms of contract. In that case the said amount shall be treated as income of Indian subsidiary.

regards. cavishalshah@gmail.com