An intercompany services arrangement should reflect the functions actually performed, the recipient's benefit, pricing, invoicing, data roles and ownership of outputs. Coordinate corporate approvals with tax and foreign-exchange analysis. An agreement drafted after invoices are challenged may not substantiate what happened during the relevant period.
The business situation
A parent charges an Indian company an annual management fee. The agreement uses broad language, while the local team cannot identify the services received or distinguish them from shareholder activities. The issue is both documentation and the underlying arrangement.
Corporate governance is the legal connection between a decision and the company's authority to act. The articles, shareholder arrangements, statutory approvals and delegated powers should tell a consistent story. A signed commercial document does not, by itself, prove that every corporate approval was obtained.
What needs examining
01. Describe the service and the beneficiary
Identify the provider, recipient, personnel, outputs and service period. Separate routine operational support from ownership or stewardship functions where that distinction is relevant. The scope should match actual delivery. Avoid using a generic template for materially different services simply because the parties belong to the same group.
02. Align governance, tax and payment mechanics
Assess related-party and authority requirements, transfer-pricing and GST treatment, withholding and FEMA implications where applicable. These are connected analyses, not interchangeable approvals. A board resolution does not establish the tax treatment, and a tax working does not prove contractual authority. Record who is responsible for each assessment.
03. Keep delivery evidence throughout the year
Maintain service reports, work products, allocation explanations and recipient confirmations appropriate to the arrangement. Reconcile them to invoices and adjustments. Address confidential information, personal data and intellectual property explicitly. Periodic review should identify changes in actual functions that require updated terms or a revised tax analysis.
Law, contract and recommended practice
Companies Act, 2013 provisions and applicable rules must be checked for the company's category, exemptions and transaction. Listed entities need a separate securities-law analysis. Private agreements cannot override mandatory company law.
Connect the control to the evidence
Use this table to scope the review. The legal basis and the practical control are identified separately.
| Obligation or objective | Practical control | Evidence to retain |
|---|---|---|
| Corporate and legal assessment Authorise the arrangement appropriately | Approval and relationship review | Resolutions and executed terms |
| Tax assessment Support the charging and tax position | Function, benefit and pricing analysis | Allocation workings and tax records |
| Recommended practice Demonstrate actual delivery | Contemporaneous service evidence | Reports, outputs and invoice reconciliation |
Records to prepare
Bring the complete, current record to the review. Preserve earlier versions where a change or disputed event makes them relevant.
Common questions
Is an intercompany invoice enough to prove a service?
No. It records a charge, but the underlying service, benefit and legal or tax treatment may need additional evidence. Maintain contemporaneous records appropriate to the actual work.
Can one global agreement cover every group service?
It may provide a framework, but local schedules and analyses may still be needed for different functions, entities, data flows and regulatory requirements.
Reconcile one quarter's invoices to actual services and the executed agreement. Use the gaps to improve the arrangement before the next billing cycle.
Legislation & official resources
These references identify the governing frameworks. Confirm the current text, relevant amendments and applicable judicial position for the matter.
- Companies Act, 2013 — official legislative portalIndia Code · Government of India · Locate the current Act and applicable rules on India Code. Company category, exemptions and amendments matter.
- Indian Contract Act, 1872Government of Uttar Pradesh · Commercial Tax Department · Government-hosted statutory reference. Read with applicable amendments, special law and judicial interpretation.
This note is general information. The scenario is hypothetical and does not describe a client matter. The legal result depends on the facts, documents, jurisdiction and operative law. No individual lawyer review is represented by the preparation date.
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