TaxTMI 
TaxTMI 
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.
SERVICE TAX LIABILITY BETWEEN HOLDING AND SUBSIDIARY COMPANY
25 Apr 2016 
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Distinct entity status: intra group transfers taxable only if they constitute consideration for a service rendered.
Whether transfers from a subsidiary to its holding company attract service tax turns on whether the payments constitute consideration for a service between distinct entities. One position treats holding and subsidiary as distinct entities making receipts taxable if they are consideration for services; the contrasting position maintains that mere monetary transfers, absent a service, fall outside the definition of service. A factual analysis of the nature and purpose of the transfer is necessary to determine service tax liability. (AI Summary)
Whether transfers from a subsidiary to its holding company attract service tax turns on whether the payments constitute consideration for a service between distinct entities. One position treats holding and subsidiary as distinct entities making receipts taxable if they are consideration for services; the contrasting position maintains that mere monetary transfers, absent a service, fall outside the definition of service. A factual analysis of the nature and purpose of the transfer is necessary to determine service tax liability. (AI Summary)