Under valuation of services by a related company.

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Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2017 What are the legal implications when a related company "A "give a 100 rupees work contract to another related company "B" for 50 rupees . A is a foreign company and B is Indian company.

thanks in advance.

CA Suresh Jain

CA Suresh Jain (Expert)
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06 January 2017 Provisions of Income tax for computing your income in view of understanding the transaction with related party shall be applicable. Such transactions are also required to be reported by the Statutory Auditors and there may be a risk of action under FEMA

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2017 Thanks for the reply I Know TP is applicable but not sure if under valuation of services as per service tax would be appliacble.

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CA Suresh Jain

CA Suresh Jain (Expert)
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06 January 2017 There is no concept of related parties in Service Tax but suppression of facts or willful default, if it could be proved by the department, would lead to severe consequences.

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2017 Thank you for your advise.