Profit share given to land owner

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This query is : Resolved

Naveen Sridhar (Querist)

02 March 2018 One of my friend is starting up an agriculture business as a partnership.
The have taken a land for lease to cultivate their crops.
The land owner claims profit share from the business instead of fixed lease/rental payments.
can any one let me know how to account this expense? under what nature of expenses?

Is there any restriction under any law for this kind of agreement between land owner (consideration for use of land as profit share from agriculture business)?

Thanks in Advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 March 2018 Account it as land owner's share of profit.
No restrictions under any laws this kind of agreement.

Message likes : 1 times

Naveen Sridhar

Naveen Sridhar (Querist)

02 March 2018 Thanks for your reply...
But the land owner is not a partner in the business...
he just giving his land for cultivation...
so accounting as profit share means, do we need to put this agreement as part of the Partnership deed ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 March 2018 No need of part of partnership agreement. Enter land lease agreement specifying lease amount is based on profit earned on cultivation of land.
Then such payment will be accounted as lease payment expenses.

Naveen Sridhar

Naveen Sridhar (Querist)

02 March 2018 OK Understood..
Thanks a Lot Sir...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 March 2018 Welcome.............

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