Does Sharing a common place of work against rent comes under Related party Transactions
This query is : Resolved
Quick Summary
16 July 2025
Dear Friends,
There are 4 Pvt Ltd cos in a group.
A Pvt. owns a commercial building on one floor of which it has its own office and as well as the offices of other group companies which share common space, manpower and facilities. They have made this place as a corporate office and to register it as a communication office for bank purpose.The banks want them to provide a proof of tenancy ie. rent agreement.But the problem comes with the provisions of Related party transactions under section 184 of CA
All other floors are available to let out and rent is very high in the area. So if A Pvt Ltd charges a rent which is not an arm's length price, then provisions of RPT. will tigger.
So, please let me know your news on the following.
1. Is this transaction i.e. sharing common space attracts related party transactions.
2.How to determine the rent payable by each co that it doesn't attract RTP provisions
3. Is there any way that the RPT doesn't apply in this matter?
4. Can a single rent agreement be made as a co-lease in which one company is lessor and rest 3 as lessee and a common terms and conditions applicable to all is it legally acceptable agreement.
There are 4 Pvt Ltd cos in a group.
A Pvt. owns a commercial building on one floor of which it has its own office and as well as the offices of other group companies which share common space, manpower and facilities. They have made this place as a corporate office and to register it as a communication office for bank purpose.The banks want them to provide a proof of tenancy ie. rent agreement.But the problem comes with the provisions of Related party transactions under section 184 of CA
All other floors are available to let out and rent is very high in the area. So if A Pvt Ltd charges a rent which is not an arm's length price, then provisions of RPT. will tigger.
So, please let me know your news on the following.
1. Is this transaction i.e. sharing common space attracts related party transactions.
2.How to determine the rent payable by each co that it doesn't attract RTP provisions
3. Is there any way that the RPT doesn't apply in this matter?
4. Can a single rent agreement be made as a co-lease in which one company is lessor and rest 3 as lessee and a common terms and conditions applicable to all is it legally acceptable agreement.
19 July 2025
You can consider it as permission to use table space at lower rate. Contact a professional to draft such agreement which should be valid for GST registration.
26 September 2025
Good luck...
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