Accounting of Land and Development expenses

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Anto Jacob (Querist)
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21 August 2008 A Private Limited is company, incorporated in India. B Private Limited is another company, incorporated in India. B Private Ltd has 100 acres of land in its books. There are no other assets or liabilites other than this land. A private Limited purchased the entire shares of B private Limited, with the only intention of acquiring the land. A private Limited has a project of constructing residential apartments in this land. The land will not be transferred to the Apartment owners. It will be on lease for a period of 99 years,. A private limited has entered into various agreements for developing and constructing of residential apartments. The land is still in the books of B Private Ltd. The development expenses are incurred by A Private Ltd, which is treated as project development expenses, in the books of A Private Limited.

Querry:
1. Whether the land will be shown as Fixed Assets or Stock in Trade, in the books of B Private Ltd

2. How the project expenses will be accounted in the books of A Private Limited, when the land is not in the books of A Private Limited

Anto Jacob

Anto Jacob (Querist)
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21 August 2008

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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03 October 2008 As the property in land is retained by B Ltd., permanently, they will be shown as fixed asset.

You have to clarify whether A ltd has entered into an agreement with B ltd regarding land development.

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