Our Company (ABC) had hired a factory at Marol, now this factory belongs to one of our associate companies (XYZ). We used to carry out manufacturing process in this factory & used to pay rent to the associate company (XYZ)along with service tax. Now from August 2008 the (ABC) has stopped Mfg process & the whole factory has shut down, still for the whole year (ABC) has given rent to (XYZ)alongwith service tax. Now in the F.Y. 2009-2010 (ABC) has made a termination agreement between himself & xyz on June. Accordingly rent has been paid for the month April & May 2009 alongwith service tax. My question here is how can we stop giving rent to XYZ as per the agreement, when some of our Fixed Assets are still lying in the factory. Some of these Fixed Assets are sold from the factory even after June-2009., is it OK to do this, i mean if the factory is still occupied by my Assets i should pay them the rent. Please show me the right way is it OK to do such kind of transaction.
your question is mostly based on mutual understanding of both the companies. Since you had paid rent for 2 months and terminated the contract you are out of the perview of accounting entries... And i hope they are not asking your company for rent. Prepare a MOU if possible with the company so that they cannot sell the assets.For preparation or anything you can contact me.. No problem for that.
CAclubindia
