[See section 7(1)]
RULES FOR DETERMINING THE VALUE OF
ASSETS
PART
A
GENERAL
Value of assets how to be
determined.
1. The value of any asset, other than cash, for
the purposes of this Act, shall be determined in the manner laid down in these
rules.
Definitions.
2. In this Schedule, unless the context
otherwise requires,
(1) accounting
year in relation to a company means a period in respect of which any profit
and loss account of the company laid before it in the annual general meeting is
made up ;
*(2) debenture includes debenture stock,
bonds and any other securities of a company, whether constituting a charge on
the assets of the company or not;
*(3) equity
share means any share in the share capital of a company other than a
preference share;
(4) gold
means gold, including its alloy, whether virgin, melted, remelted, wrought or
unwrought, in any shape or form of a
purity of not less than nine carats and includes any gold coin (whether legal
tender or not), any gold ornament and other article of gold;
(5) gold
ornament means any article in a finished form, meant for personal adornment or
for the adornment of any idol, deity or any other object of religious worship
made of, or manufactured from, gold, whether or not set with stones or gems,
real or artificial, or with pearls, real, cultured or imitation, or with all or
any of them and includes parts, pendants or broken pieces of gold ornaments ;
(6) investment
company means a company whose gross total income consists mainly of income
which is chargeable to income-tax under the heads Income from house property,
Capital gains and Income from other sources.
Explanation.In
this clause, the expression gross total income shall have the meaning
assigned to it in section 80B of the Income-tax Act ;
(7) jewellery includes
(a)
ornaments made of gold, silver, platinum
or any other precious metal or any alloy containing one or more of such
precious metals, whether or not containing any precious or semi-precious
stones, and whether or not worked or sewn into any wearing apparel ;
(b) precious or semi-precious stones, whether or
not set in any furniture, utensils or other article or worked or sewn into any
apparel ;
*(8) preference
share has the meaning assigned to it in section 8537 of the Companies Act,
1956 (1 of 1956) ;
*(9) quoted share or quoted debenture,
in relation to an equity share or a preference share or, as the case may
be, a debenture, means a share or
debenture quoted on any recognised stock exchange with regula-rity from time to
time, where the quotations of such shares or debentures are based on current
transactions made in the ordinary
course of business.
Explanation.Where
any question arises whether a share or debenture is a quoted share or a
quoted debenture within the meaning of this clause, a certificate to that
effect furnished by the concerned stock exchange in the prescribed form38 shall be accepted as
conclusive ;
*(10) recognised stock exchange has the
meaning assigned to it in clause (f) of section 239 of the Securities Contracts (Regulation) Act, 1956 (42 of
1956) ;
*(11) unquoted share or unquoted debenture,
in relation to an equity share or a preference share or, as the case may be, a
debenture, means a share or debenture which is not a quoted share or a quoted
debenture.
PART B
IMMOVABLE PROPERTY
Valuation of immovable property.
3. Subject to
the provisions of rules 4, 5, 6, 7 and 8, for the purposes of sub-section (1)
of section 7, the value of any immovable property, being a building or land
appurtenant thereto, or part thereof, shall be the amount arrived at by
multiplying the net maintainable rent by the figure 12.5 :
Provided that in relation to any such property which is
constructed on leasehold land, this rule shall have effect as if for the figure
12.5,
(a) where the unexpired period of the
lease of such land is fifty years or more, the figure 10.0 had been substituted
; and
(b) where the unexpired period of the
lease of such land is less than fifty years, the figure 8.0 had been
substituted :
Provided further that where such property is acquired or construction of
which is completed after the 31st day of March, 1974, if the value so arrived
at is lower than the cost of acquisition or the cost of construction, as
increased, in either case, by the cost of any improvement to the property, the
cost of acquisition or, as the case may be, the cost of construction, as so
increased, shall be taken to be the value of the property under this rule :
Provided also that the provisions of the second proviso shall not apply
for determining the value of one house belonging to the assessee,where such
house is acquired or the construction whereof is completed after the 31st day
of March, 1974, and the house is exclusively used by the assessee for his own
residential purposes throughout the period of twelve months immediately
preceding the valuation date and the cost of acquisition or, as the case may
be, the cost of construction, as increased, in either case, by the cost of any
improvement to the house, does not exceed,
(a) if the house is situate at Bombay,
Calcutta, Delhi or Madras, fifty lakh rupees ;
(b) if the house is situate at any other
place, twenty-five lakh rupees :
Provided also that where more than one house belonging to the
assessee is exclusively used by him for residential purposes, the provisions of
the third proviso shall apply only in respect of one of such houses which the
assessee may, at his option, specify in this behalf.
Net maintainable rent how to be computed.
4. For the
purposes of rule 3, net maintainable rent in relation to an immovable property
referred to in that rule, shall be the amount of gross maintainable rent as
reduced by
(i) the
amount of taxes levied by any local authority in respect of the property ; and
(ii) a sum equal to fifteen per cent of
the gross maintainable rent.
Gross maintainable rent how to be computed.
5. For the
purposes of rule 4, gross maintainable rent, in relation to any immovable
property referred to in rule 3, means
(i) where the property is let, the
amount received or receivable by the owner as annual rent or the annual value
assessed by the local authority in whose area the property is situated for the
purposes of levy of property tax or any other tax on the basis of such
assessment, whichever is higher;
(ii) where the property is not let, the
amount of annual rent assessed by the local authority in whose area the
property is situated for the purpose of levy of property tax or any other tax
on the basis of such assessment, or, if there is no such assessment or the property
is situated outside the area of any local authority the amount which the owner
can reasonably be expected to receive as annual rent had such property been
let.
Explanation.In this rule,
(1) annual rent means,
(a) where
the property is let throughout the year ending on the valuation date
(hereinafter referred to as previous year), the actual rent received or
receivable by the owner in respect of such year;
(b) where
the property is let for only a part of the previous year, the amount which
bears the same proportion to the amount of actual rent received or receivable
by the owner for the period for which the property is let as the period of
twelve months bears to the number of months
(including part of a month) during which the property is let during the
previous year :
Provided
that in the following cases, such actual rent under sub-clauses (a) and
(b) shall be increased in the manner specified below :
(i) where the
property is in the occupation of a tenant and taxes levied by any local
authority in respect of the property are borne wholly or partly by the tenant,
by the amount of the taxes so borne by the tenant ;
(ii) where the
property is in the occupation of a tenant and expenditure on repairs in respect
of the property is borne by the tenant, by one-ninth of the actual rent ;
(iii) where the
owner has accepted any amount as deposit (not being advance payment towards
rent for a period of three months or less), by the amount calculated at the
rate of 15 per cent per annum on the amount of deposit outstanding from month
to month, for the number of months (excluding part of a month) during which
such deposit was held by the owner in the previous year, and if the owner is
liable to pay interest on such deposit, the increase to be made under this
clause shall be limited to the sum by which the amount calculated as aforesaid
exceeds the interest actually paid;
(iv) where the
owner has received any amount by way of premium or otherwise as consideration
for leasing of the property or any modification of the terms of the lease, by
the amount obtained by dividing the premium or other amount by the number of
years of the period of the lease;
(v) where the
owner derives any benefit or perquisite, whether convertible into money or not,
as consideration for leasing of the property or any modification of the terms
of the lease by the value of such benefit or perquisite;
(2) rent
received or receivable shall include all payments for the use of the property,
by whatever name called, the value of all benefits or perquisites whether
convertible into money or not, obtained from a tenant or occupier of the
property and any sum paid by a tenant or occupier of the property in respect of
any obligation which, but for such payment, would have been payable by the
owner.
Adjustments to value arrived at under rule 3, for
unbuilt area of plot of land.
6. Where the
unbuilt area of the plot of land on which the property referred to in rule 3 is
constructed exceeds the specified area, the value arrived at in accordance with
the provisions of rule 3 shall be increased by an amount calculated in the
following manner, namely :
(a) where
the difference between the unbuilt area and the specified area exceeds five per
cent but does not exceed ten per cent of the aggre-gate area, by an amount equal to twenty
per cent of such value;
(b) where
the difference between the unbuilt area and the specified area exceeds ten per
cent but does not exceed fifteen per cent of the aggre-gate area, by an amount
equal to thirty per cent of such value;
(c) where
the difference between the unbuilt area and the specified area exceeds fifteen
per cent but does not exceed twenty per cent of the aggregate area, by an
amount equal to forty per cent of such value.
Explanation.For the purposes of this rule and rule 6,
(a) aggregate
area, in relation to the plot of land on which the property is constructed,
means the aggregate of the area on which the property is constructed and the
unbuilt area;
(b) specified
area, in relation to the plot of land on which the property is constructed,
means
(i) where the property is situate at
Bombay, Calcutta, Delhi or Madras, sixty per cent of the aggregate area ;
(ii) where the property is situate
at Agra, Ahmedabad, Allahabad,
Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur,
Kanpur, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem, Sholapur,
Srinagar, Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi
(Benaras), sixty-five per cent of the aggregate area; and
(iii) where the property is situate at
any other place, seventy per cent of the aggregate area :
Provided that
where, under any law for the time being in force, the minimum area of the plot
of land required to be kept as open
space for the enjoyment of the property exceeds the specified area, such
minimum area shall be deemed to be the specified area;
(c) unbuilt
area, in relation to the aggregate area of the plot of land on which the
property is constructed, means that part of such aggregate area on which no
building has been erected.
Adjustment for unearned increase in the value of the
land.
7. Where the
property is constructed on land obtained on lease from the Government, a local
authority or any authority referred to in clause (20A) of section 10 of
the Income-tax Act, and the Government or any such authority is, under the
terms of the lease, entitled to claim and recover a specified part of the
unearned increase in the value of the land at the time of the transfer of
the property, the value of such
property as determined under rule 3 shall be reduced by the amount so liable to
be claimed and recovered or by an amount equal to fifty per cent of the value
of the property as so determined, whichever is less, as if the property had
been transferred on the valuation date.
Explanation.For the purpose of this rule, unearned increase
means the difference between the value of such land on the valuation date as
determined by the Government or such authority for the purpose of calculating
such increase and the amount of the premium paid or payable to the Government
or such authority for the lease of the land.
Rule 3 not to apply in certain cases.
8. Nothing
contained in rule 3 shall apply,
(a) where, having regard to the facts and
circumstances of the case, the Assessing Officer, with the previous approval of
the Deputy Commissioner, is of opinion that it is not practicable to apply the
provisions of the said rule to such a case; or
(b) where the difference between the unbuilt
area and the specified area exceeds twenty per cent of the aggregate area; or
(c) where the property is constructed on
leasehold land and the lease expires within a period not exceeding fifteen
years from the relevant valuation date and the deed of lease does not give an
option to the lessee for the renewal of the lease,
and in any case referred to in clause (a) or
clause (b) or clause (c), the value of the property shall be determined
in the manner laid down in rule 20.
PART
C
40[Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]
PART
D
ASSETS
OF BUSINESS
Global valuation of assets of business.
14. (1) Where
the assessee is carrying on a business for which accounts are maintained by him
regularly, the net value of the assets of the business as a whole, having
regard to the balance-sheet of such business on the valuation date after
adjustments specified in sub-rule (2) shall be taken as the value of such
assets for the purposes of this Act.
(2) For the purposes of sub-rule (1)
(a) the value of any asset as disclosed
in the balance-sheet shall be taken to be,
(i) in the case of an asset on which
depreciation is admissible, its written-down value;
(ii) in the case of an asset on which no
depreciation is admissible, its book value;
(iii) in the case of closing stock its value adopted
for the purposes of assessment under the Income-tax Act for the previous year relevant
to the corresponding assessment year;
(b) where the value of any of the assets referred to in clause (a),
deter-mined in accordance with the provisions of this Schedule as applicable to
that particular asset or if there are no such provisions, determined in
accordance with rule 20, exceeds the value arrived at in accordance with clause
(a) by more than 20 per cent, then the higher value shall be taken to be
the value of that asset;
(c) the value of an asset not
disclosed in the balance-sheet, shall be taken to be the value determined in
accordance with the provisions of this Schedule as applicable to that asset;
(d) the value of the following assets
which are disclosed in the balance sheet shall not be taken into account,
namely :
(i) any amount paid as advance tax under the
Income-tax Act;
(ii) the debt due to the assessee according to the
balance-sheet or part thereof which has been allowed as a deduction under
clause (vii) of sub-section (1) of section 36 of the Income-tax Act, for
the purposes of assessment for the previous year relevant to the corresponding
assessment year under that Act;
(iii) the value of any asset in respect of which
wealth-tax is not payable under this Act;
(iv)
any amount shown in the balance-sheet
including the debit balance in the profit and loss account or profit and loss
appropriation account which does not represent the value of any asset;
(v) any asset shown in the balance-sheet not
really pertaining to the business;
(e) the following amounts shown as
liabilities in the balance-sheet shall not
be taken into account, namely :
(i) capital employed in the business other than
that attributable to borrowed money;
(ii) reserves by whatever name called;
(iii) any provision made for meeting any future or contingent
liability;
(iv) any liability shown in the balance-sheet not
really pertaining to the business;
(v) any debt owed by the assessee to the extent
to which it has been specifically utilised for acquiring an asset in respect of
which wealth-tax is not payable under this Act:
Provided that where it is not
possible to calculate the amount of debt so utilised, it shall be taken as the
amount which bears the same proportion to the total of the debts owed by the
assessee as the value of that asset bears to the total value of the assets of
the business.
Explanation.Provision for any purpose
other than taxation shall be treated as a reserve.
Part E
Interest in firm
or association of persons
Valuation of interest in firm
or association of persons.
15. The value
of the interest of a person in a firm of which he is a partner or in an
association of persons of which he is a member shall be determined in the
manner provided in rule 16.
Computation of net wealth of the firm or association
and its allocation amongst the partners or members.
16. The net
wealth of the firm or association of persons on the valuation date shall first
be determined as if it were the assessee and, thereafter,
(i) that
portion of the net wealth of the firm or association as is equal to the amount
of its capital shall be allocated among the partners or members in the
proportion in which capital has been contributed by them;
(ii) the
residue of the net wealth of the firm or association shall be allocated
amongst the partners or members in accordance with the agreement of
partnership or association for the distribution of assets in the event of
dissolution of the firm or association or, in the absence of such agreement, in
the proportion in which the partners or members are entitled to share the
profits,
and the sum total of amounts so allocated to a
partner or member under clause (i) and clause (ii) shall be
treated as the value of the interest of that partner or member in the firm or
association:
Provided that in determining the net wealth of the firm or
association for the purposes of this rule, no account shall be taken of the
exemptions in sub-sections (1) and (1A) of section 5.*
Explanation.For the purposes of this rule,
(a) where the net wealth of the firm or association
computed in accordance with this rule includes the value of any assets located
outside India, the value of the interest of any partner or member in the assets
located in India shall be determined having regard to the proportion which the
value of assets located in India diminished by the debts relating to those
assets bears to the net wealth of the firm or association;
(b) where
the net wealth of the firm or association computed in accordance with this rule
includes the value of any assets which are exempt from inclusion in the net
wealth under sub-sections (1) and (1A) of section 5, the value of the interest
of a partner or member shall be deemed to include the value of his
proportionate share in the said assets and, the provisions of sub-sections (1)
and (1A) of section 5*
shall apply to him accordingly;
(c) where the net wealth of the firm
or association computed in accordance with this rule includes the value of any
assets referred to in sub-section (2) of section 5, * the value of the interest
of a partner or member shall be deemed to include the value of his
proportionate share in the said assets, and the provisions of sub-section (2)
of section 5* shall apply to him
accordingly.
Part F
Life Interest
Valuation of life interest.
17. (1) For the
purposes of sub-section (1) of section 7, the value of the life interest of an
assessee shall be arrived at by multiplying the average annual
1
income that accrued to the
assessee from the life interest by the fraction
p
+ d
minus 1, where P represents the annual premium for a
whole life insurance without profits on the life of the life tenant for unit
sum assured as specified in
i
the Appendix to these rules,
and d is equal to i being the rate of
1
+i
interest.
Explanation.In this rule,
(a) life tenant means a person for the duration
of whose life the life interest is to subsist;
(b) average annual income means the average of
the gross income derived by the assessee from the life interest during each
year of the period ending on the valuation date, reduced by the average of the
expenses incurred on the collection of such income in each of those years :
Provided that the amount of the reduction for such expenses shall,
in no case, exceed five per cent of the average of the annual gross income :
Provided
further that in case the income so
derived is for a period exceeding three years, only that income derived during
the three years ending on the valuation date shall be taken into account;
(c) the
rate of interest shall be 6 per cent per annum.
(2) Notwithstanding anything contained in sub-rule
(1),
(a) the
Assessing Officer may, if he is of the opinion that in the case of the life
tenant, a life insurance company would not take the risk of insuring his life
at the normal premium rates in force but would demand a higher premium, vary
the valuation suitably;
(b) the value of the life interest so
determined shall, in no case, exceed the value as on the valuation date as
determined under this Schedule, of the corpus of the trust from which the life
interest is derived.
Part G
Jewellery
41[Valuation of jewellery.42
18. The value
of the jewellery shall be estimated to be the price which it would fetch if
sold in the open market on the valuation date (hereafter in this rule referred
to as fair market value).
(2) The return of net wealth furnished by the
assessee shall be supported by,
(i) a statement in the prescribed form,
where the value of the jewellery on the valuation date does not exceed rupees
five lakhs;
(ii) a
report of a registered valuer in the prescribed form, where the value of the
jewellery on the valuation date exceeds rupees five lakhs.
(3)
Notwithstanding anything mentioned in sub-rule (2), the Assessing Officer may,
if he is of opinion, that the value of the jewellery declared in the return,
(a) is less than its fair market value by
such percentage or such amount as is prescribed under sub-clause (i) of
clause (b) of sub-section (1) of section 16A;
(b) is less than its fair market value as
referred to in clause (a) of sub-section (1) of section 16A,
he may refer the valuation of such jewellery to a
Valuation Officer under sub-section (1) of the said section and the value of
such jewellery shall be the fair market value as estimated by the Valuation
Officer.]
Adjustment in value of jewellery for subsequent
assessment years.
19. The value
of any jewellery determined in accordance with 43[sub-rule (3)] of rule 18 for any assessment year
(hereinafter referred to as the first assessment year), shall be taken to be the
value of such jewellery for the subsequent four assessment years, subject to
the following adjustments, namely :
(a) where
the jewellery includes gold or silver or any alloy containing gold or silver,
the value of such gold or silver or such alloy as on the valuation date
relevant to the concerned subsequent assessment year shall be substituted for
the value of such gold or silver or alloy on the valuation date relevant to the
first assessment year;
(b) where any jewellery or part of
jewellery is sold or otherwise disposed of
by the assessee, or any jewellery or part of jewellery is acquired by
him, on or before the valuation date relevant to the concerned subsequent year,
the value of the jewellery determined for the first assessment year shall be
reduced or increased, as the case may be, and the value as so reduced or
increased shall be the value of the jewellery for such subsequent assessment
year.
Part H
Residuary
Valuation of assets in other cases.
20. (1) The value of any asset, other than cash, being an asset which
is not covered by rules 3 to 19, for the purposes of this Act, shall be
estimated to be the price which, in the opinion of the Assessing Officer, it
would fetch if sold in the open market on the valuation date.
(2) Notwithstanding anything contained in sub-rule
(1), where the valuation of any asset referred to in that sub-rule is referred
by the Assessing Officer to the Valuation Officer under section 16A, the value
of such asset shall be estimated to be the price which, in the opinion of the
Valuation Officer, it would fetch if sold in the open market on the valuation
date.
(3) Where the value of any asset cannot be estimated
under this rule because it is not saleable in the open market, the value shall
be determined in accordance with such guidelines or principles as may be
specified by the Board from time to time by general or special order.
Restrictive covenants to be ignored in determining
market value.
21. For the removal
of doubts, it is hereby declared that the price or other consideration for
which any property may be acquired by or transferred to any person under the
terms of a deed of trust or through or under any restrictive covenant in any
instrument of transfer shall be ignored for the purposes of determining under
any provision of this Schedule, the price such property would fetch if sold in
the open market on the valuation date.
Appendix
[See rule
17]
Table of ( 1/p+d 1)
|
Age nearer birthday
|
Premium for unit
sum assured
|
(1/p+d)-1
Value of life interest of rupee 1 per annum
at 6% rate of interest
|
|
1
|
2
|
3
|
|
0.
|
0.02906
|
10.100
|
|
1.
|
0.01590
|
11.999
|
|
2.
|
0.01295
|
12.517
|
|
3.
|
0.01162
|
12.765
|
|
4.
|
0.01095
|
12.893
|
|
5.
|
0.01065
|
12.951
|
|
6.
|
0.01058
|
12.965
|
|
7.
|
0.01063
|
12.955
|
|
8.
|
0.01076
|
12.930
|
|
9.
|
0.01095
|
12.893
|
|
10.
|
0.01117
|
12.850
|
|
11.
|
0.01142
|
12.803
|
|
12.
|
0.01169
|
12.751
|
|
13.
|
0.01197
|
12.699
|
|
14.
|
0.01226
|
12.644
|
|
15.
|
0.01257
|
12.587
|
|
16.
|
0.01286
|
12.534
|
|
17.
|
0.01319
|
12.473
|
|
18.
|
0.01350
|
12.417
|
|
19.
|
0.01387
|
12.351
|
|
20.
|
0.01431
|
12.273
|
|
21.
|
0.01469
|
12.207
|
|
22.
|
0.01512
|
12.132
|
|
23.
|
0.01556
|
12.057
|
|
24.
|
0.01606
|
11.972
|
|
25.
|
0.01656
|
11.888
|
|
26.
|
0.01706
|
11.806
|
|
27.
|
0.01762
|
11.715
|
|
28.
|
0.01825
|
11.614
|
|
29.
|
0.01894
|
11.505
|
|
30.
|
0.01962
|
11.399
|
|
31.
|
0.02037
|
11.285
|
|
32.
|
0.02112
|
11.173
|
|
33.
|
0.02194
|
11.053
|
|
34.
|
0.02281
|
10.927
|
|
35.
|
0.02369
|
10.804
|
|
36.
|
0.02462
|
10.675
|
|
37.
|
0.02562
|
10.541
|
|
38.
|
0.02669
|
10.400
|
|
39.
|
0.02787
|
10.249
|
|
40.
|
0.02912
|
10.093
|
|
41.
|
0.03044
|
9.932
|
|
42.
|
0.03181
|
9.771
|
|
43.
|
0.03325
|
9.607
|
|
44.
|
0.03475
|
9.441
|
|
45.
|
0.03637
|
9.267
|
|
46.
|
0.03806
|
9.092
|
|
47.
|
0.03987
|
8.911
|
|
48.
|
0.04181
|
8.724
|
|
49.
|
0.04387
|
8.533
|
|
50.
|
0.04612
|
8.333
|
|
51.
|
0.04850
|
8.130
|
|
52.
|
0.05100
|
7.926
|
|
53.
|
0.05362
|
7.722
|
|
54.
|
0.05637
|
7.518
|
|
55.
|
0.05931
|
7.310
|
|
56.
|
0.06244
|
7.099
|
|
57.
|
0.06575
|
6.888
|
|
58.
|
0.06925
|
6.676
|
|
59.
|
0.07294
|
6.464
|
|
60.
|
0.07681
|
6.255
|
|
61.
|
0.08167
|
6.008
|
|
62.
|
0.08589
|
5.806
|
|
63.
|
0.09025
|
5.610
|
|
64.
|
0.09475
|
5.419
|
|
65.
|
0.09938
|
5.234
|
|
66.
|
0.10415
|
5.054
|
|
67.
|
0.10907
|
4.879
|
|
68.
|
0.11414
|
4.709
|
|
69.
|
0.11938
|
4.543
|
|
70.
|
0.12483
|
4.380
|
|
71.
|
0.13054
|
4.220
|
|
72.
|
0.13652
|
4.062
|
|
73.
|
0.14278
|
3.907
|
|
74.
|
0.14936
|
3.753
|
|
75.
|
0.15627
|
3.602
|
|
76.
|
0.16356
|
3.453
|
|
77.
|
0.17125
|
3.305
|
|
78.
|
0.17937
|
3.160
|
|
79.
|
0.18796
|
3.016
|
|
80.
|
0.19706
|
2.875
|
