KNOWLEDGE BANK FROM B KANAGA SABAPATHY
LET KNOWLEDGE SPREAD
Message from B. K. sir 17/04.2023
Question :
What are the 10 points to be remembered by a registered valuer when he wants to estimate cost of construction for Income Tax purpose?
My opinion :
1. The purpose is to estimate the cost.
2. The meaning is the amount the assessee has actually spent in the construction.
3. The cost is to be ascertained on the date of construction.
4. Valuation of land is not in the scope of valuation.
5. The four methods of estimating the cost is
i) Accounting method
ii) Detailed estimate method
iii) CPWD rate method
iv) State PWD rate method
6. All the above methods are accepted and the valuer must arrive at the cost judiciously.
7. In case of complicated structures when standard rated cannot be applied, the best solution is to go for the detailed estimate method.
8. Assuming the replacement cost as on the date of valuation, applying suitable depreciation and then calculating depreciated value as on the date of construction and certifying as the “cost” is not the right procedure.
9. It is to be remembered that your report is likely to be verified by the valuation cell of Income Tax department.
10. It is your duty to defend your valuation when questioned.
With best wishes,
B. KANAGA SABAPATHY
bkvaluer@gmail.com
www.bkanagasabapathy.com
About the Author:-
- Mr. B. Kanaga Sabapathy born in 1951, is a Civil Engineer who belongs to the 1972 batch of Regional Engineering College, Tiruchirappalli in Tamilnadu.
- He is a Registered valuer of the Central Board of Direct Taxes, a Professional Engineer and also a Chartered engineer. Valuation is his main profession..
- He was the National Vice-President of the Institution of Valuers (India) for 11 terms.
- He is a regular contributor of articles in the Indian Valuer Journal from the year 1985. His articles especially his regular column “Questions & Opinions” are very popular among the practising valuers in India.
- His book “Guidelines on Valuation for Banks” (2002) is used to be referred by many banks. The valuation formats designed by him were accepted and adopted as the formats by many banks in the country.
- His son K. Arun and daughter B.K. Aruna are also approved valuers and they also contribute articles to the Indian valuer journal.
- His guru: Mr. C.H. Gopinatha Rao, Chennai.
- His mentor: Mr. R.K. Gandhi, Mumbai.
- His role model: Mr. S. Rajaratnam, Chennai.
- His best students: Thousands of valuers in the country
