Rent or interest

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

31 October 2013 Dear Sir,
Where a partner providing his own land for business purpose then firm should pay rent to that partner
or
firm should pay interest @12% on the market value of property, considering it capital invested by partner.

Please clarify.

Ajay Mishra

Ajay Mishra (Expert)
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31 October 2013 I think, firm has no right to consider its firm property and pay interest thereon.

Querist : Anonymous

Querist : Anonymous (Querist)

31 October 2013 Then what are the formalties that firm should do to pay interest. Whether for that firm has to draft a rend agreement if yes then said partner has to sign it as both capacity of landlord and tenent.

or

Only insertion of rent clause in partnership deed is sufficient.

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CA Rinkal

CA Rinkal (Expert)
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31 October 2013 there two possibities in your case

1. if the firm considers the property as property taken on rent from partner, and there has been a rent agreement between firm and partner then the firm should pay rent

2. if partner consider the same as his capital contribution then firm should pay interest on property.

so you can do as you get favorable...

Querist : Anonymous

Querist : Anonymous (Querist)

31 October 2013 Which option is best?