Machinery received without consideration

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 June 2012 Hi

Our parent company in abroad send us few machinery and spares free of cost for manufacture of goods. That goods in turn sold to them and also to few third parties.

As part of documentation an agreement has been entered with the parent company stating that they are owner of the asset and we need to maintain in good condition and use it for intended purpose. NO consideration is involved.

In my books of accounts there wont be any addition as such since we are not owner and no outflow since no consideration is paid. The same is not even in updated in FAR. We just have a record of assets / spares received for control purpose.

Do we need to do any thing else? Is there any statutory requirement need to be fulfilled? Will it be a lease as per AS-19??

Kindly give your views / comments asap.

rgds
VS

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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04 June 2012 It means that you are doing jobwork for the parent company. It is true for many Small scale manufactureres in Motor Car industry where spare parts are outsources.

In the given case, the revenue which you might receive from supplying back the finished goods would only include a samller margin.

Parent Company will have to update the record for the asset location in your premise.

Depending upon the revenue sharing, lease may be embedded in this contract.

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2012 Any impact in Transfer Pricing and FEMA for the same???