LEASE PREMIUM PAYABLE FOR LEASE HOLD LAND

Dear Friend,

Here, first following some points, we need to understand.

• Pay “Lease premium of Rs.2.5 crores” to Lessor upfront. ( up to this it is clear.   When we say upfront, repeat word ‘UPFRONT’, how is one allowed a ‘MORATORIAM of 2 years’? Another point, how balance is allowed to be paid in 10 equal instalments?
• Upfront gives an impression of  payment must be completely paid at once.

For time being, let us ignore all this and let me accept your statements literally and proceed into solution:

Your question “whether this Premium amount is to be written off in the books of Lessee company during the lease period”,  drags us to focus our attention towards the concept of “Fixed Assets & deprecation.”    

From your words ‘PREMIUM’, it is clear that whatever you are going to pay as ‘LEASE PREMIUM’ enables an enterprise to get “ECONOMIC BENEFITS” for coming 90-long years on the subject land.    So, proportionately you need to charge the same to your statement of Profit & Loss account.

Now, when it comes to Rs.450/-, you may understand that same will be charged to the Statement of Profit & Loss.