We were auditors for XYZ Polymers India (P)Ltd (Dont want to mention the name).
XYZ Polymers India (P)Ltd is a polymers manufacturing company, XYZ Electronics India limited is a sister concern of the said company. XYZPI entered in to contract with XYZEI to supply polymers at Rs.70/Per ton. XYZEI have moulders(something like regional sales offices) at various places in India and XYZEI may agreee with moulders at a price more than 70/- or less than 70/-, according to market conditions and other criterias. Some times XYZEI asks XYZPI to directly supply o the moulders on behalf of XYZEI at the price which is agreed between XYZEI and moulders. If agreed at 74/tonn then XYZPI will retain 70/- and the rest 4/- will be given to XYZEI. if agreed price with other moulder is 68/- then XYZPI will account for 70/- in their books of accounts and either raise a debit note or will adjust if there is any amount palayble in cases like 74/tonn.
During this transaction all the DHC( Depo handling charges), and other incidental expenses were being born by XYZPI company) .Statutory payments are also being born by XYZPI.
Now my client wants to know is whether this transaction legally tennable or not? plz can any one clarify me in this regard with proper section, if applicable or with any case laws.
Thank you
Swaroop, SRO0141517
CAclubindia
