Morris and Peter LLP (MP LLP) is a firm of Chartered Accountants that offers boutique financial services to its clients in accountancy, audit, tax…

CA Final · Integrated Business Solutions (Multidisciplinary Case Study) · MTP · November 2026
Morris and Peter LLP (MP LLP) is a firm of Chartered Accountants that offers boutique financial services to its clients in accountancy, audit, tax consultancy, business advisory services. It is a limited liability partnership with 15 partners established 34 years ago, with its main head office in Mumbai. Currently, it has 9 branches across India in cities like Delhi, Kolkata, Bangalore, Chennai, Ahmedabad, Jaipur, Vishakhapatnam, Bhopal and Chandigarh.On account of a growing economy in the country, large numbers of business are entering into either internal or external reconstruction; as a result advisory services are in huge demand. MP LLP started its business advisory domain service just recently over the past one year. This firm ensures that business advisory segment operates within the legal boundaries that are defined under applicable laws. On account of widespread automation, the market for accounting services is now mature and has not seen much growth in the recent years. Each domain of service is under the charge of a team of partners. They have clearly demarcated work assignments within themselves.As part of performance analysis at MP LLP partners meet once a year to review each business segments. In April 2026, they met to review the performance of the previous financial year. Please refer to Annexure 1 for details performance related data for F.Y. 2025-26. Business performance impacts the overall remuneration of partners and employees. For the current year, the partners have set an across the board 10% growth of revenue target over previous year. This is applicable to all the segments.Remuneration Structure at MP LLP Partners are getting fixed contractual payment apart from a variable pay of at least ₹1,00,000 approx. Each partner will be compensated based on the annual revenue they generate in their domain service. The variable pay due to the partners is credited to their respective capital account as and when it accrues. The payment of variable pay is made once in June of the next financial year. For example, for variable pay related to F.Y. 2025-26, payment was made in June 2026. TDS on the variable pay is deducted @ 15% at the time of payment. Non – Partners are getting fixed salary apart from variable pay depending upon rating in their performance appraisal that they have with their reporting seniors The rating will take into consideration their individual performance, contribution to the team, their skill sets and overall potential for future contribution to the firm. However, in addition to individual and team performance, their variable pay is also significantly dependent on the firm's financial performance during the year. There have been instances when a good performer who is part of a well performing team did not get any significant variable pay on account of the firm not meeting its profit targets for the year. HR team holds periodic meetings to explain the remuneration structure to the employees.Acquisition of Leader Board LLP (LB LLP)MP LLP acquired Leader Board LLP, a Chartered Accountant firm in Guwahati that specializes in accounting and audit services. MP LLP wants to acquire this business vertical from LB LLP in order to increase its market presence in the north east region of the country. Rather than launching a new branch independently, the partners opted for acquisition to ensure more successful market entry. This was done following due process adhering to the guidelines laid down by ICAI and other applicable regulations.Sachin Nadkari is in charge of maintaining the books of MP LLP. He requests CA Stefan Morris, the founder partner of MP LLP to provide him with the details of this acquisition in order to make appropriate entries in the books. These details are provided to him in the email referred to in Annexure 2. On receiving the details Sachin prepares to account for this acquisition in the books of MP LLP. However, he is unsure if he needs to account for any intangible asset.Provision of service by head office to branchesMP LLP has a centralized Information Technology (IT) department at its head office in Mumbai. Services are provided to both the head office in Mumbai and the branches across India. Services to the branches are based on the service requests raised by each of the branch. Due to the infrequent nature of these requests, MP LLP does not raise GST tax invoice to the branches for the services provided by the IT department at the head office. It should be noted that branches are entitled to claim full ITC on any GST on such services,Further MP LLP has a centralized Human Resources (HR) department at its head office in Mumbai. Services are provided to both the head office in Mumbai and the branches across India. Services to the branches comprise of regular monthly activities like payroll processing, HR support, update and maintenance of employee records etc. Since regular service is provided by this department, MP LLP raises a notional GST tax invoice of ₹ 50,000 per month to each of its branches. This notional figure is not based on specific cost components relating to the HR department like salary cost of employees providing this service. The head office pays the GST based on this invoice, while the branches can claim full ITC on this.While reviewing its annual returns, the GST authorities raised an objection that MP LLP is incorrect in its handling of invoicing for its IT and HR department services provided from the head office to its branches. Their main contention are as follows:(1) in case of HR services, a notional value of ₹50,000 per month per branch is raised by the HO in the GST tax invoice. This is being disputed. The GST authorities contend that the OMV declared in the invoice has to necessarily based on the open market value of similar services provided by third party vendors.(2) in case of IT services, no invoice is being raised despite the services being provided by the HO to the branches. In its tax filings, MP LLP is considering the OMV for these services to be NIL. These services have an open market value (OMV). Therefore, GST authorities contend that the invoice should be raised based on the OMV and GST tax on this has to be collected on such value.Sachin Nadkarni counters that MP LLP there is no contravention relating to invoicing of these services as laid down in the provisions of the GST law. Each of these entities have different GST registrations as required by the GST law and are considered as distinct persons.Deceased partner's share in profits of MP LLPCA. Atul Kulkarni, one of the 15 partners at MP LLP died due to natural causes on June 15th, 2026. His widow Smt. Jaya Kulkarni, his legal representative has approached the firm to continue to receive a share of the firm's profits. CA. Stefan Morris is unsure if this is permissible.Annexure 1Performance data relating to FY 2025-2026 Particulars for MP LLP Accounting Audit Tax Consultancy Business Advisory Revenue (In ₹ Crores) 700 923 75 80 Growth of revenue over previous year 2% 6% 10% 18% Net profit ratio 5% 3% 7% 12% Revenue (In ₹ Crores) of market segment as whole 3,500 7,210 1,835 320 Customer Ratings (higher the better) on a scale of 5 3.2 2.9 3.4 4.6 Annexure 2: Email from Stefan Morris to Sachin Nadkari about acquisition of LB LLPFrom:"Stefan Morris" Sent:25th May, 2026 10:00To:"Sachin Nadkari" Cc:Subject:Acquisition details of LB LLPAttachments:Dear Sachin,On May 1, 2026, MP LLP acquired the entire stake of Leader Board LLP for a purchase consideration of ₹ 15 crores. The fair value of net assets acquired is 11 crores. The purchase consideration includes payment for the following as well: (1) ₹ 2 crores for obtaining the skilled staff at LB LLP. (2) ₹ 2 crores by way of payment towards “Non-compete fee” so as to restrict LB LLP to compete in the same line of business for next 5 years.However, items (1) and (2) are not forming part of the ₹ 11 crores fair value of net assets acquired.Hope this provides you with all the details required to account for this acquisition.Stefan.Evaluate the correctness of Sachin Nadkarni's claim that there is no contravention relating to invoicing of HR and IT services as laid down in the provisions of the GST law.

Suggested Answer and Working Notes:

Where there is supply of goods or service between distinct entities like the Head Office and its branches, they are considered taxable supply under the cross-charge mechanism of the CGST Act, 2017 [Section 7(1)(c) of the CGST Act, 2017]. The head office provides internal services like HR and IT to its branches, which are taxable services falling under this framework.The value of supply of services made by the head office to its branches needs to be determined as per rule 28 of the CGST Rules, 2017 read with section 15(4) of the CGST Act, 2017. As per rule 28(a) of the CGST Rules, 2017, the value of supply between distinct persons shall be the Open Market Value (OMV) of such supply. Where the recipient is eligible for full ITC, the value declared in the invoice shall be deemed to be the OMV of the services. (second proviso to rule 28).Accordingly, in respect of supply of services by head office to branch offices, in cases where full ITC is available to a branch office, the value declared on the invoice by the head office to the said branch office in respect of the said supply shall be deemed to be the OMV of such services. This is irrespective of whether cost of any particular component of such services, like employee costs etc. has been included or not in the value of the services in the invoice. Therefore, where the invoice is issued, the open market value is the value declared in the invoice.Further, in such cases where full ITC is available to the recipient, if HO has not issued a tax invoice to the BO in respect of any particular services being rendered by HO to the said BO, the value of such services may be deemed to be declared as Nil by HO to BO, and may be deemed as OMV in terms of second proviso to rule 28. (1) In view of the above explanation, in case of HR services, the notional value of ₹50,000 per month per branch as raised by the HO in the GST tax invoice will be considered as the open market value. Therefore, the contention of the GST authorities that suggests that OMV declared in the invoice has to necessarily based on the open market value of similar services provided by third party vendors is incorrect.Further the law states that in cases where full ITC is available to the recipient, if the head office has not issued a tax invoice to the branch office in respect of any particular service being rendered by the head office to the branch office, the value of such services may be deemed to be declared as Nil by head office to branch office. This will be deemed as the OMV in terms of the second proviso to rule 28. Therefore, where invoice is not issued, value of supply which is also the OMV will be considered NIL. (2) In case of IT services, no invoice is being raised despite the services being provided by the HO to the branches. In its tax filings, MP LLP has been considering the OMV for these services to be NIL. This is the correct approach. Although these services have an open market value (OMV), in view of the above explanation, where no invoice is raised, the OMV will be deemed to be nil in terms of the second proviso to rule 28. It can therefore be concluded that Sachin Nadkari is correct in contending that the firm is complying with the provisions of the GST Law in both cases.
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