Question

tehri collery co.ltd took on lease a property from somesh at a royalty of 50 paise per ton with a minimum rent oc 2000 per annum . each year shortworkings is recoverable out of the royalities of next five year . in the event of strike ,the minimum rental not being reachd ,the lease provided that the actual royalities earned for the year will discharge all the rental obligations for that year.accounts are prepared on 31st december each year

Answer 1

Explanation:

contract is entered into between the landlord and the lessee for payment of royalty, usually

calculated upon the quantum of production or sale at a certain stipulated rate.

Since sale or production mostly depends on the capacity of the person to whom the rights have been

given. To avoid such a situation, the landlord and the lessee agreed upon a minimum periodical

amount that the landlord will receive from the lessee, even if the actual royalty as calculated on the

basis of actual production or sale is less than such minimum amount.

This assured and mutually agreed periodical minimum amount is known as “Minimum Rent”.