Public Deposits u/s 58A and 58AA

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 January 2010 A real estate co. takes advance from public for sale of land, on the condition that it shall either provide them with a plot of land or shall repay the amount with 10% interest.
Whether the amount so received shall be classified as deposit from public;
and whether Companies (Acceptance of Deposits) Rule, 1975 shall be applicable.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
Follow

23 January 2010 While drafting the agreement between the company and its customers; the care should be taken that the company will provide a plot of land but in case the committment is not fulfilled; then the company shall pay a "PENALTY" of 10% to the customers.

Then this will not attract Section 58A.

Otherwise also it would not attract section 58A.

But the wordings put by you is like -

"EITHER" provide them with a plot of land "OR" shall repay the amount with 10% interest.

Which may create litigation.

Ankur Garg

Ankur Garg (Expert)
Follow

26 January 2010 If you fail to fulfill the conditions of the agreements then this amount would be cnsidered as a public deposit.

Later on ROC may object to this practice particularily at the time of scrutiny of your balance sheet.

Regards

Upgrade to CAclubindia Pro. Subscribe Now!