Company and turnover

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shubhneet gugnani (Querist)
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23 December 2011 Suppose there are 2 companies A Pvt Ltd and B PVT LTD and both of them are engaged in the construction business.
Now if A and B come together to develop a particular project and form AB PVT LTD for the same , and A wants to add the turnover from the PROJECT done by AB PVT LTD. is it possible for A PVT LTD to do the same if B pvt ltd has no problem with it..?

Plzz reply to it...
Its really urgent ....
THANK U..

Jiten Gupta

Jiten Gupta (Expert)
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23 December 2011 i think ab pvt ltd is a separate entity. it is having its own accounts, A Pvt Ltd can not do so even though B Pvt Ltd does not have any objection.

shubhneet gugnani

shubhneet gugnani (Querist)
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23 December 2011 okay..

But if AB PVT LTD has mentioned in its articles that A ltd will get all the construction and the turnover benefit ... then..?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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19 July 2024 In the scenario you've described, where two companies (A Pvt Ltd and B Pvt Ltd) come together to form a new entity (AB Pvt Ltd) for a specific project, the treatment of turnover and benefits depends largely on how AB Pvt Ltd is structured legally and contractually. Here’s a breakdown based on the different aspects:

### Scenario 1: AB Pvt Ltd's Articles Mention A Pvt Ltd Gets All Construction and Turnover Benefits

If AB Pvt Ltd’s articles of association specify that A Pvt Ltd will receive all construction work and turnover benefits, then:

1. **Legal Structure**: AB Pvt Ltd is a separate legal entity from A Pvt Ltd and B Pvt Ltd.

2. **Contractual Agreement**: The agreement among A Pvt Ltd, B Pvt Ltd, and AB Pvt Ltd should clearly outline the roles, responsibilities, and profit-sharing arrangements.

3. **Turnover Recognition**: A Pvt Ltd may recognize the turnover from the project in its financial statements if:

- The arrangement with AB Pvt Ltd allows for such recognition.
- The project is executed under terms that legally allow A Pvt Ltd to consider the turnover as part of its business operations.

4. **Consent from B Pvt Ltd**: Since B Pvt Ltd is a party to the formation of AB Pvt Ltd, its consent is crucial. If B Pvt Ltd has agreed that A Pvt Ltd will benefit from the turnover of the project, then A Pvt Ltd can typically proceed with recognizing the turnover, provided all legal and contractual obligations are met.

### Scenario 2: General Partnership Structure without Specific Agreements

If there are no specific provisions in AB Pvt Ltd’s articles or agreements stating that A Pvt Ltd gets all construction and turnover benefits:

1. **Separate Entity**: AB Pvt Ltd operates as a separate legal entity with its own rights and responsibilities.

2. **Profit-sharing**: Typically, profits and turnover generated by AB Pvt Ltd would belong to AB Pvt Ltd, not directly to A Pvt Ltd or B Pvt Ltd individually.

3. **Recognition by A Pvt Ltd**: A Pvt Ltd cannot unilaterally recognize the turnover of AB Pvt Ltd’s project unless there is a contractual agreement or legal basis allowing it to do so.

4. **Consent and Legal Arrangements**: A Pvt Ltd would need explicit consent or a legal basis to recognize the turnover from AB Pvt Ltd’s project. This consent should ideally be documented in the agreements between A Pvt Ltd, B Pvt Ltd, and AB Pvt Ltd.

### Conclusion

The ability of A Pvt Ltd to add the turnover from AB Pvt Ltd’s project depends on the legal structure of AB Pvt Ltd and the contractual agreements in place among A Pvt Ltd, B Pvt Ltd, and AB Pvt Ltd. If AB Pvt Ltd’s articles specify that A Pvt Ltd will receive all benefits from the project, and if B Pvt Ltd agrees to this arrangement, then A Pvt Ltd can generally recognize the turnover from the project. However, without such provisions, A Pvt Ltd cannot unilaterally claim the turnover of AB Pvt Ltd’s project.

It is crucial for all parties involved to ensure that agreements are clear, legal, and compliant with corporate and taxation laws to avoid misunderstandings or disputes regarding turnover and benefits from joint projects. Consulting with legal and financial advisors can provide tailored guidance based on the specific circumstances and agreements in place.

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