CAN A VALUER BE BIASED BY THE BOOK VALUE

KNOWLEDGE BANK FROM B KANAGA SABAPATHY

LET KNOWLEDGE SPREAD

Message from B. K. sir 27/04/2023

Question :

A valuation assignment has come to me. The purpose is to estimate the FMV as on 01.04.2001. In this case, the assessee has constructed the building in the year 2000 and the cost shown in the Income Tax assessment is Rs. 34.55 lakhs. By applying an escalation factor of 10%, i have worked out the value as on 2001 as 34.55 x 1.1 = 38 lakhs. Whereas when I worked out the FMV for building alone by applying State PWD rates, the value comes to 45 lakhs.

Now, my doubt is : whether I can certify the FMV excluding the land component as 38 lakhs or 45 lakhs?

My opinion :

Certify the FMV of building as per the Act, i.e. for 45 lakhs. (Add the FMV of land also).

You need not worry about the cost as per the balance sheet.

Follow CEV on Social Media

With best wishes,

B. KANAGA SABAPATHY
[email protected]
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