KNOWLEDGE BANK FROM B KANAGA SABAPATHY 

LET KNOWLEDGE SPREAD

Message from B K Aruna 28.08.2023

Ten points to be remembered by a registered valuer when he wants to estimate cost of construction for Income Tax purpose :

1. The purpose of valuation here is to estimate the cost.

2. The meaning is the amount the assessee has actually spent on the construction.

3. The cost is to be ascertained on the date (period) of construction and not on the date of valuation.

4. Valuation of land is not in the scope of valuation.

5. The four methods of estimating the cost are :

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 for which standard rates are not available, 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 it as the “cost” is WRONG.

9. It is to be remembered that your report is likely to be scrutinised 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