Audit_Query

In situation where two sister concern having seperate assessee status according to Income Tax i.e. one is Company (ABC Company) other is Proprietary Concern (ABC Enterprise) if they both provide stock to each other in Stock Out Situation at which rate they should provide the good in inter firm transfer. Both are coming under 44AB...........that is at cost or at market price? and will there be VAT effect in that?
Replies (3)

As both are different entities, both shall have effect of the transactions taking place between them. Now it is upto them to decide at what price to transfer, whether at market rate or cost. However, they cant transfer them at a price above arms length price as such transactions wont be allowed under Income Tax Act the the excess price paid over the arms length prices shall be disallowed. As sais earlier, is is upto the parties to decide the price and accounting shall be done on the same price. So, if the turnover as achieved on the basis of price so entered exceeds 40 lakhs then tax audit shall be applicable.

 

Further as the parties have separate existence, the same shall be applicable in case of VAT also. So, the provisions of VAT are also applicable to the transactions between them.

 

Regards.

Yes, VAT is very much applicable as both are seperate entities and also have seperate VAT Registration.

Thank you very much for the reply to my query in very short time with proper ans thanks again.

 

Best wishes

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