01 May 2008
a company is engaged in trading of industrial tools claiming and passing on modvat on trading to customers. recently it started manufacturing one such tool and is not maintaining separate accounts for manufacturing activity .what advantages/disadvantages it will have under Income tax as well as excise by forming separate independent company OR unit within same company for manufacturing division
02 May 2008
IF A SEPATATE COMPANY IS FLOATED FOR TRADING AND MANUFACTURING ,THEN EACH COMPANY ENJOYS SEPARATE DEDUCTIONS UNDER VARIOUS HEADS OF EXP.UNDER INCOME TAX ACT AND SAVES ON TAX.IT IS POSSIBLE TO LOAD MORE EXP.LIKE DEP.ON PLANT&MACHINERY,PROCESS EQIUPMENT,ACCESSORIESETC... OF COURSE,ALTERNATIVELY, THE ABOVE EXP. CAN ALSO BE DEBITED IN EACH INDIVIDUAL DIVISION WHEN YOU PEPARE SEPARATE P&L ACCOUNT FOR EACH DIVISION.DIVISION WISE AUDITED FINANCIAL STATEMENTS TO BE PREPARED FOR ASSESSMENT OF INCOME TAX AND FOR LENDERS LIKE BANKS/FIN.INSTS. A MNFG. CO CAN TAKE MODVAT CRERDIT FOR THE EXCISE PAID BY IT ON ALL APPLICABLE ITEMS. WHERE AS A TRADING CO. CAN AVAIL SERV. TAX BENEFIT IF THE OUTPUT AND INPUT services FALL UNDER SAME HEAD . TWO SEPARATE COS. MEANS MORE STATUTORY COMPLIANCES UNDER DIFFERENT APPLICABLE ACTS ,SEPATRATE NAME AVAILABILITIES AND NAME APPLICATIONS AND TWO BOARD OF DIRECTORS AND SEPARATE REGISTRATIONS AGAIN FOR EACH CO.AND MORE COSTAND MORE COMPLIANCES. IF PAID UP CAPITAL EXCEEDS RS. TWO CRORES,THEN YOU NEED TO HAVE A QUALIFIED COMPANY SECEREATY FOR EACH. CO. IN A SINGLE COMPANY,DIVISION WISE BOOKS IF YOU HAVE , YOU HAVE THE OPTION OF LOADING SOME EXP. EITHER WAY TO SUIT YOUR REQUIREMENTS. THE APPLICABILITY OF STATUES IS DIFFERENT FOR A TRADING CO. AND DIFFERENT FOR A MNFG. CO LIKE AS YOU HAVE STATED, EXCISE AND FACTORIES ETC.. APPLY TO MNGFG. CO.AND SERVICE TAX ,SHOPS AND EST.ACT ETC.. APPLY TO TRADING CO. VAT IF APPLICABLE APPLIES TO BOTH COS. EACH OF THE OPTIONS HAS ITS ATTENDANT ADVANTAGES AND DISADVANTAGES. R.V.RAO
16 January 2010
If this company is not maintaining separate excise records, storages of material then it is violating excise rules a gross will be under offence of excise law. Only as manufacturing can be run but simultaneously doing trading business require separate registration also.
CAclubindia
