Method of Valuation of Assets and Liability for the purposes of section 115TD(2) - [ Rule 17CB ] - Income Tax - Ready Reckoner - Income Tax

Method of valuation for the purposes of section 115TD(2) [ Rule 17CB ] Value of the Total Liability The total liability of the specified person shall be the book value of liabilities in the balance sheet on the specified date but not including the following amounts , namely:- (i) capital fund or accumulated funds or corpus, by whatever name called; (ii) reserves or surpluses or excess of income over expenditure, by whatever name called; (iii) any amount representing contingent liability; (iv) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (v) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of income-tax claimed as refund under the Act, to the extent of the excess over the income-tax payable with reference to the income in accordance with the law applicable thereto. [ Sub Rule 17CB ] V alue of the Total Assets The aggregate fair market value of the total assets of the specified person, shall be the aggregate of the fair market value of all the assets in the balance sheet as reduced by - (i) any amount of income-tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of income-tax claimed as refund under the Act, and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset. The fair market value of the asset shall be determined in the following manner, namely:- (I) Valuation of shares and securities,- (a) the fair market value of quoted share and securities shall be the following:- (i) the average of the lowest and highest price of such shares and securities quoted on a recognised stock exchange as on the specified date; or (ii) where on the specified date, there is no trading in such shares and securities on a recognised stock exchange, the average of the lowest and highest price of such shares and securities on a recognised stock exchange on a date immediately preceding the specified date when such shares and securities were traded on a recognised stock exchange, (b) the fair market value of unquoted equity shares shall be the value, on the specified date as determined in accordance with the following formula, namely:- Fair market value of unquoted equity shares = A = book value of all the assets in the balance sheet (other than bullion, jewellery, precious stone, artistic work, shares, securities, and immovable property) as reduced by- (i) any amount of income-tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of income-tax claimed as refund under the Act; and (ii) any amount shown in the balance sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; B = fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule; L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:- (i) representing contingent liabilities other than arrears of dividends payable in respect of the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of income-tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of income-tax claimed as refund under the Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity share, (c) The fair market value of shares and securities other than equity shares shall be estimated to be price it would fetch if sold in the open market on the specified date on the basis of the valuation report from a merchant banker or an accountant in respect of such valuation. (II) The fair market value of an immovable property shall be higher of the following:- (a) price that the property shall ordinarily fetch if sold in the open market on the specified date on the basis of the valuation report from a registered valuer; and (b) stamp duty value as on the specified date. (III) The fair market value of a business undertaking , held by a specified person, shall be its net assets determined in accordance with the following formula:- Fair market value = (A + B - L), which shall be determined in the manner provided in sub-clause (b) of clause (I) of rule 17CB(2). (IV) The fair market value of any asset , other than those referred to in clauses (I), (II) and (III), shall be the price that the asset shall ordinarily fetch if sold in the open market on the specified date on the basis of valuation report from a registered valuer: In case no valuer is registered for valuation of such assets, the valuation report shall be obtained from a valuer who is a member of any one of the professional valuer bodies viz. Institution of Valuers, Institution of Surveyors (Valuation Branch), Institution of Government Approved Valuers, Practicing Valuers Association of India, The Indian Institution of Valuers, Centre for Valuation Studies, Research and Training, Royal institute of Chartered Surveyors; India Chapter, American Society of Appraisers, USA; Appraisal institute, USA or A valuer who is appointed by any public sector bank or public sector undertakings for valuation purposes.