SERVICE TAX LIABILITY BETWEEN HOLDING AND SUBSIDIARY COMPANY

[RAJEEV JAIN]

A Pvt Ltd is holding company of B Pvt Ltd.A Pvt Ltd holds 99% shares of B Pvt Ltd. B Pvt Ltd is into hotel business and transfers majority of its income to A Pvt Ltd. B Pvt Ltd pays service tax on the receipts of its hotel business. The question is whether service tax liability will arise if B Pvt Ltd transfers 90% of the income to A Pvt Ltd. Kindly clarify with applicable notifications/circulars and extract from law. Thanks in advance.

AI Summary

Subsidiary's income transfer to holding company raises service tax question; distinct entity status may imply liability. A holding company, A Pvt Ltd, owns 99% of a subsidiary, B Pvt Ltd, which operates in the hotel business. B Pvt Ltd pays service tax on its income but transfers 90% of this income to A Pvt Ltd. The query is whether this transfer incurs additional service tax liability. One respondent highlights that holding and subsidiary companies are distinct entities, suggesting a tax liability. Another argues that since no service is provided in the transfer, it may not be taxable. A third response supports this view, noting that mere monetary transactions do not constitute a service under the law.