QUESTION & OPINION

– B. Kanaga Sabapathy 27.01.2022

Question :

1. If a plot was purchased in the year 1936 for Rs 2,54,000/-, can I adopt the same amount as the fair market value as on 2001?

2. If the construction was done in 1942….to arrive at the CPWD plinth area rate as on 2001, whether I can adopt the basic plinth area rate from the base year 1955 (the first CPWD plinth area rate)?

Opinion :

You have not mentioned the date of sale….whether it is on or before 31.03.20I7 or on or after 01.04.2017. The base year will vary depending on the date of sale.

1. Assuming the date of sale year is on or before 31.03.2017 :

a) The fair market value of the property (land and building) has to be ascertained as on 01.04.1981 and suitably indexed by adopting old cost inflation indices.

*Ascertain the fair market value of the plot as of 01.04.1981.

*By adopting the prescribed CPWD plinth area rates as of 1976 as the basis, arrive at the replacement rate as on 1981. Considering the age of the building as 39 years, calculate the depreciated value of the building as on 1981. Adopting the constant percentage method is preferable.

*The sum of the above two will be the FMV.

2. Assuming the sale year is on or after 01.04.2017 :

The Fair market value of the property as on 01.04.2001 has to be ascertained and suitably indexed by adopting new cost inflation indices.

* The fair market value of plot has to be ascertained as on 01.04.2001.

*By adopting the prescribed CPWD rates as on 1992 as the basis, arrive at the replacement rate as on 2001. Considering the age of the building as 59 years, calculate the depreciated value of the building as on 01.04.2001. Adopting constant percentage method to determine depreciation is advisable.

*The sum of the above two is the FMV.

(Courtesy: Mr. R. Jayaraman)