Accounting doubt

Vinod Lakhera (CA in service) (85 Points)
Replied 15 August 2012

(Note: while providing opinion following has been considered:

1. Mr. X is a commission agent.

2. He provides taxable service.)

Ans 1. It depends what policies and norms he follows... He may include the reimbursement expense in his bill also. As he is commission agent, the commission he earns is revenue for him.

2. Only revenue part is taxable ( Both under Income Tax as well as Finance Act 1994)

3. For reimbursement of expenditure:

XYZ A/c ....Dr

To Bank A/c

a. for commssion

XYZ A/c .....Dr

To Sales/Commssion A/c

Varshit Shah (Self Employed) (676 Points)
Replied 15 August 2012

Dear Devendra ,

Your query is not so clear......Because as you said Mr.X is working onbehalf of Y & again he raises (Mr.x) his debit note in the name of XYZ Ltd. Then you are saying that Mr.Y is raising entire bill (Sales Commission + expenses ). Anyways till the extent what i understood i'll express my opinion.

1.) From Service tax point of view :

If Mr.x is charging as it is expenses incurred by him in the debit note i.e. without any profit element...then such amount is not subject to service tax......As working in the capacity of Pure agent.

2.)From TDS point of view : If some one is providing combine bill i.e. service charges + out of pocket expenses then entire amount is subject to tds. But if you provide independent bill for reimbursement of out of pocket expenses , then such bill is not subject to tds.

3.) Entry will be..........Expenses a/c ......dr
to X/y a/c

Varshi t shah

1 Like

CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 16 August 2012

1) It is prudent business practice and tax planning to raise the debit note and sale invoice seperately to avoid unncessary income tax and service tax complications.

2) Sales invoice pertains to Commission alone is liable for TDS and ST

3) For Debit note, entry for reimdurement of travelling expenses of Mr.Y should be:

a) on receiving the Debit note:

Expenses A/c .......Dr. xxxxxx

To X A/c xxxxxx

b) On actual payment::

X A/c ............Dr xxxxxx

To Cash or Bash A/c xxxxxx

1 Like

Venkat (Dy. Manager Finance) (272 Points)
Replied 16 August 2012

For reimbursement of expenses - no TDS.... if reimbursement of expenses and services charges invoice was raised seperately.

In present case two seperate invoices ie., for Reimbursement and Comission.

So TDS and service tax applicable to Commision part and not applicable to reimbursement part.

Vineet (Assistant Manager) (140 Points)
Replied 18 August 2012

It's good if you raised separte debit note and sales bill as one relates to the reimbursement and othe is related to business(comission)

secondly, if you raise one sales bill for commission and reimbursement in that case tax would be payable on total invoice value and it's a loss for your company.

Lastly if you raised a separate debit note then you have to pass an entires

expenses ac debit to XXXXX

to m\s xyz account XXXXXX

next when you receive the amount in that case

x ac debit to XXXXX

to bank ac XXXXX

I hope it clear the doubt buddy

Nazia (Asst Manager - Finance) (139 Points)
Replied 02 April 2013

can one someone give me the format of debit note for services rendered by the parent company to the subsidiary company like technical & marketing support, etc., and also for reimbursement of expenses.