EXPENSES BORNE BY SUBSIDIARY COMPANY

[Guest]

A NRI (Employee of holding company) is on visit subsidiary company(On Business VISA) incorporated in India. And subsidiary company want to borne the expenses on hospitality (Rent of House) of NRI.(There is no provision in MOA or AOA of subsidiary company incorporated in India regarding Payment of such expense)

What are the various compliance to be followed before making such payment(Such expenses are to be booked in Indian company books and the same is not reimbursed by foreign holding company)
and what will be tax treatment of same in hands of Employee and Subsidiary Indian company  

[Rama Krishana]

In case the expenses are being incurred in India, nothing is taken out, no foreign exchange is involved, as per my view FEMA does not put prescribe any guideline or condition or restriction.

If you find any contrary, please let me update, since it my preliminary view only.

AI Summary

Foreign exchange compliance: preliminary view that expenses incurred in India attract no FEMA restriction when no funds leave India. A subsidiary Indian company proposes to bear hospitality expenses for an NRI employee of its foreign holding company visiting India and to book those expenses in its Indian books without reimbursement. The preliminary advisory view stated that if the expenses are incurred in India and involve no foreign exchange outflow, FEMA does not prescribe restrictions or conditions on such payments, though this view was noted as preliminary and no definitive tax analysis was provided.