Expert Advisory Committee
ICAI-Expert Advisory Committee
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3.28     Query

 

Interpretation of Manufacturing and Other Companies

(Auditor’s Report) Order, 1975

A company is engaged in the business of developing colonies. The company buys land from the owners on instalments and the land is divided into plots of smaller sizes which are then sold to different persons on instalment basis. The company develops the land in accordance with the terms and conditions of sale agreements by providing for water supply, sewerage, construction of roads, parks etc.

Whether the company will be treated as a trading company or a service company as defined by clause (2) of the Manufacturing and Other Companies (Auditor’s Report) Order, 1975?

 

Opinion                                                                                                             January 16, 1978

 

In the opinion of the committee, if the indicated activities of the company are the only activities, the company would be deemed to be carrying on trading activities and also deemed to be rendering services and therefore provisions of the Manufacturing and Other Companies (Auditor’s Report) Order, 1975 would be applicable to it.