Accounting of Payments to Landlords

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  1. SRINIVASA RAO P

    SRINIVASA RAO P New Member

    Dear CA Fraternity, We are engaged in Real Estate Business . We purchase land from the landlords , develop it and sell them in plots. At the time of purchase of land from Landlords , we enter into agreement with them and payments are made to them by way of Cheques ( some part by way of cash) over a period of time .These payments are booked under "Advances paid to Landlords" till the land is registered in our favour by way of sale deed. The land will be registered in our favour at the time of final payment to the landlord . The consideration value which is reflected in the Sale Deed will be less than the actual payment made to the landlord (since registration will be done at the market value prevailing in that area and stamp duty is paid on this market value) Now the question is : How do I account for these type of transactions in the books of A/c . Can I directly book the total amount paid to the landlord under Purchases A/c ? or Do I have to book the consideration value which is shown in Sale Deed under Purchases A/c . If yes then where do I book the remaining amount which was paid to the landlord and under What head of A/c ? Further what is the type of accounting treatment that should be followed from Accounting point of view and also under Income Tax Act and Accounting Standards if : 1. It is a Private Limited Company and 2. It is a Partnership Firm (not a limited liability Partnership Firm) Please explain to me in a detailed manner and also suggest me if there are any links on this subject.
     
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