Transfer of Holding Co. overhead expenses to its subsidiaries

[SUPRAKASH MITTRA]

Holding company  passes on its overhead expenditure to its subsidiaries on some some rational basis & gives debit memos to its subsidiaries foe accounting purpose. My query is:

1) Whether this is a 'service' provided by the holding company to its subsidiary companies?

2) Does this attract service tax provisions?

3) Is the subsidiary company required to deduct TDS against the PAN no of its holding co. on the basis of debit memo received  ? If so then under which section

A reply in this regard will be of great help

[deepak gulati]

There will be neither Service tax liability nor  TDS liablity since ST will be applicable only if there is any markup is done on the memos and TDS is not applicable on reimbursement of Expenses

Regards

 

Punit Bansal

AI Summary

Reimbursement of expenses does not attract service tax or TDS absent any markup on intercompany debit memos. Where a holding company charges subsidiaries by debit memos that merely reimburse overheads without any markup, such transfers are not a taxable service and do not attract service tax; likewise, reimbursements of expenses do not give rise to an obligation on the subsidiary to deduct tax at source, with TDS exposure arising only if amounts include remunerative consideration such as a markup.