Jayanta Bandyopadhyay 27 November 2023

Related party transaction and export under lut

Father and 2 sons own Pvt Ltd Co and sells exclusively to one LLP [ where those 2 sons are Partners], who in turn export. In absence of any 3 rd party sale, there is no independent price discovery. What AS plays its role here? Please guide.

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Quick Summary

This discussion explores the complexities of related party transactions within a family business structure, specifically concerning a Pvt Ltd Co selling exclusively to an LLP where family members are partners. The core issue is the lack of independent price discovery due to the absence of third-party sales, raising questions about applicable accounting standards (AS). While a legal transfer of business was not the case, the ongoing sale of manufactured goods between entities requires careful consideration of pricing and compliance. Advice leans towards seeking legal counsel for clarity on these specific business arrangements.

3 Replies

T. Kalaiselvan, Advocate (Advocate) 27 November 2023

What is the definition or elaboration of AS ?

If the business was sold by the directors of the private limited by follwing proper legal procedures to a LLP or any third party until and unless ther is no legal infirmity in it and all the requirements were properly complied, then the transfer of property by sale to LLP by this private limited company can be held as legally valid.

Jayanta Bandyopadhyay 27 November 2023

Business was not sold. Only manufactured items at Ltd Co unit is sold to LLP, all within family for export. There is no 3 rd party sale. Hence, no price discovery of independent transaction. Pl guide