Rule 189 - Valuation method for accreted income under section 352(2)

Accreted income asset valuation method. 189. (1) For the purposes of section 352(2), the aggregate fair market value of the total assets of the specified person shall be the aggregate fair market value of all assets in the balance sheet, reduced by the amount of tax paid and any amount shown as an asset (including unamortised deferred expenditure) which does not represent the value of any asset. (2) Fair market value is determined as follows— (I) shares and securities: for a quoted share or security, the average of the lowest and highest price on a recognised stock exchange on the specified date (or, if not traded on that date, on the immediately preceding date when it was traded); for an unquoted equity share, using the formula (A+B-L) x (PV)/(PE), where A = book value of assets (other than bullion, jewellery, precious stones, artwork, shares, securities and immovable property), reduced by tax paid and non-asset amounts; B = fair market value of such bullion, jewellery, precious stones, artwork, shares, securities and immovable property; L = book value of liabilities (excluding contingent liabilities, dividend amounts, reserves/surplus, excess taxation provisions, provisions for unascertained liabilities, and cumulative preference share capital); PE = paid-up equity share capital; and PV = the paid-up value of the equity share; for any other share or security, the price it would fetch if sold in the open market, based on a report of a merchant banker or accountant; (II) immovable property: the higher of the price it would ordinarily fetch in the open market (per a registered valuer's report) or its stamp duty value as on the specified date; (III) a business undertaking: its net assets, computed using the (A+B-L) formula in (I) above; (IV) any other asset: the price it would ordinarily fetch in the open market, per a report from a registered valuer or, where none is available, a member of a recognised professional valuers' body (including the Institution of Valuers, the Institution of Surveyors - Valuation Branch, the Institution of Government Approved Valuers, the Practicing Valuers Association of India, the Indian Institution of Valuers, the Centre for Valuation Studies, Research and Training, the Royal Institute of Chartered Surveyors - India Chapter, the American Society of Appraisers (USA), the Appraisal Institute (USA), or a valuer appointed by a public sector bank or undertaking). (3) Total liability is the book value of liabilities on the specified date, excluding capital, accumulated funds or corpus; reserves, surpluses, or excess income; contingent liabilities; provisions for unascertained liabilities; and taxation provisions exceeding the tax actually payable. (4) For the purposes of this rule, defined terms include "accountant" (as in section 515(3)(b)); "balance sheet" (as audited on the specified date); "merchant banker" (a Category I merchant banker registered with SEBI); "quoted share or security" (regularly quoted on a recognised stock exchange based on actual ordinary transactions); "recognised stock exchange" (as in the Securities Contracts (Regulation) Act, 1956, section 2(f)); "registered valuer" (as in section 514); "securities" (as in the Securities Contracts (Regulation) Act, 1956, section 2(h)); "specified date" (as in section 352(4), Table column C); "specified person" (as in section 355(l)); "stamp duty value" (the value adopted by a Central or State Government authority for stamp duty purposes); "tax paid" (income-tax deducted, collected or paid in advance, net of any refund claimed); and "unquoted share or security" (a share or security that is not a quoted share or security).