Back to Back Contract Account.

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Pradip (Querist)
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17 June 2010 A is awarded a contract from B and B have given same contract on back to back basis to us with an agreement that we will pay 5% on contract value to A. All the purchase invoice is in the name of A but we are issuing cheque on behalf of A. Can we book the purchase on our account? If no then what will be the treatment in the book of A and in the book of us.

Please help in this regard.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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17 June 2010 It is based on the Contract nature between B and your company.even though back to back contract, the contract is totally different to the original contract which had B,some time like this contract main contractor issue all the material free of cost and only the labour portion will be done by sub contractor. so please go through the contract nature

Pradip

Pradip (Querist)
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18 June 2010 Thanks Ramesh Sir,
The contract agreement is including material. We will raised bill including material but material invoice bill is in the name of our contractee. Contractee will not book the purchase in his books of accounts and we will have to book the material & labour cost also. Now can we book the purchase as invoice is not in our name?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 June 2010 You can book the purchase since your receiving thee materials and paying the cheque also. but one condition need to fullfil the contractee need to give the endorsement on the invoice to your company otherwise you may face problem with VAT department

Pradip

Pradip (Querist)
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18 June 2010 Thank you very much sir.

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