PROPOSED REGULATORY BODY:
NOTE FOR CONSTITUTION OF CENTRAL VALUATION BOARD
1.0 Valuation is a subject of vital national importance as it has grave impact on economic activities relating to property, comprising
(i) land and buildings,
(ii) plant and machinery
(iii) movable property like stock
and intangible assets like goodwill of a business. Hence, it is imperatively necessary for the Government of India to immediately introduce a legislation for constitution of a Central Valuation Board and to prescribe the norms for scientific and accurate valuation of the national property. This will not only bring India on par with the other countries of the World but also protect the interests of the nation in the transitional phase of the national economy, at present undergoing liberalization, privatization and globalisation.
2.0 Valuation is essential for various fiscal and non-fiscal purposes.
(A) The fiscal purposes are :-
Levy of Taxes such as :-
(i) Municipal Taxes on Land and Buildings collected by Local Self Government.
(ii) Stamp Duty collected by State Governments, on documents for transfer of properties.
(iii) Income – Tax on Capital Gains arising on transfer of property and Wealth – Tax, collected by Government of India.
At present the above functions are discharged by officers as indicated at Annexure-‘A’ who are not qualified in valuation. (Page No.9)
India lags behind the other countries in the world due to following
inadequacy in the present system
of valuation in India, for above mentioned purposes :
Valuation of assets is carried out by the persons who are registered under section 34 AB of Wealth Tax Act, 1957 read with Rule 8-A. This registration is granted for carrying out Valuation for restricted purpose of the relevant fiscal laws.
this registration is used for valuation for all purposes.
3.1.1 Immovable Property
Degree in civil engineering, architecture, town planning, from recognized university with 10 years experience in any of the following fields :-
- quantity surveying in building construction or
Post-graduate degree in valuation of real estate from recognised university with 2 years experience in any one of the above fields. (This qualification is introduced w.e.f.5th March 1997)
3.1.2 Plant and Machinery
Degree in mechanical or electrical engineering from recognized university with 10 years experience in any of the following fields :-
-lecturer preparing students of mechanical and electrical engineering or
Post-graduate degree in valuation of plant and machinery from recognised university with 2 years experience in any one of the above fields. (This qualification is introduced w.e.f.5th March 1997)
3.2 The difference between the inadequate perception in valuation in India and proper perception in other countries will be understood if we look at legal provisions on valuation in other countries.
to section 4(3) of Valuers Act of New South Wales – Australia
(b) The qualifications laid down in Valuers Act of Malaysia are :-
Valuers Act of Singapore, SriLanka, New Zealand, Fiji, Nigeria, Kenya,
Tanzania, Zambia, Zimbabwe, South Africa
prescribe academic qualification coupled with experience in valuation
to practice as a valuer.
It will be observed from the valuer’s Act of the various countries indicated above that in order to practice as a Valuer, one must acquire qualification in valuation and must have experience in valuation.
3.3 As per the existing Rules for registration as a Valuer, in our country, under Wealth Tax Act, 1957, however, one can get registration as Valuer without having any academic Qualification as well as experience, in Valuation, hence these “valuers”and start thinking of learning Valuation only after getting such registration.
3.4 One will be shocked to note that scrutiny of application for registration as valuers under the Wealth Tax Act, 1957, is carried out by the officers who have neither academic qualification nor experience in the field of Valuation. Moreover, scrutiny is limited to verification of degree certificate and whether there is any outstanding tax liability. The scrutiny hardly covers experience in valuation. It is interesting to note that it takes more time to scrutinize the applications of applicants possessing the academic qualification in valuation which is evident from the fact that in the Income Tax offices at Anand Gujarat and Mumbai the applications of academically qualified valuers is pending for more than 2 years.
3.5 At present mostly practicing Engineers and Architects are carrying out the Valuation.
3.6 The predominance of Engineers and Architects in the field of Valuation is also due to the absence of proper training facilities in the subject of valuation.
3.7 Earlier one had to avail of such specialised training through Postal Course conducted by the College of Estate Management, at Reading - England and appear for the Professional Examination held by the Royal Institution of Chartered Surveyors (R.I.C.S.) London.
There are few handful of people in the country who have passed this
3.10 The effect of such improper valuation is seen in the staggering figure of well over Rs. 1,00,000 Crores of Non – Performing Assets (NPA) with the Nationalised Banks, and under realisation in cases of properties acquired by the Income Tax Department under Chapter XXC of the Income Tax Act, 1961.
4.0 Hence, the need of the hour is to have professional Valuers, who have received formal training in all disciplines connected with valuation such as law, economics, town planning, insurance, environmental science, accountancy and engineering.
4.1 A significant beginning has been made in this direction by Charutar Vidya Mandal by establishing Centre for Valuation Studies in Institute of Science and Technology for Advanced Studies and Research (ISTAR) at Sardar Patel University, Vallabh Vidyanagar, Gujarat by offering Master’s Degree Course in valuation of Real Estate as well as Plant and Machinery.
the request from engineers and architects practising as Valuers who
can not take up Full Time courses,Dr.Babasaheb Ambedkar Open University
,Ahmedabad has introduced from this year (July 2006) the above courses
under distance learning.
4.2 These are the only universities in India to impart formal training in all subjects pertinent to valuation eg. law, economics, accountancy engineering etc. connected with valuation. While the Master’s Degree Course in Valuation of Plant and Machinery is the only full time academic programme anywhere in the World, while the course in valuation of Real Estate is the first in India.
4.4 In order to guard the national interest in the current economic scenario, it is imperatively necessary to :-
(i) Improve the quality of Valuation of movable and immovable property tangible and intangible assets.
(ii) Provide norms for valuation of all the above mentioned assets, which will be uniformly applied in the country.
(iii) To create a cadre of professionally trained and academically qualified Valuers, well versed in all aspects of valuation.
To regulate and control the conduct and work of the Professional Valuers.
5.0 To achieve these objects, it is necessary to create an autonomous Central Valuation Board in the Ministry of Finance, Government of India. Such a Board, called Appraisal Board is already established in 1969 in South Korea for performing the following tasks.
- Valuation of Collaterals of Bank Loans
5.1 Countries like Singapore, Malaysia, Sri Lanka, Australia, New Zealand, Jamaica, England, Nigeria, Kenya, Tanzania, Zambia, Zimbabwe, South Africa and Mauritius have separate agencies headed by a Chief Valuer possessing academic qualification coupled with experience in Valuation to undertake valuation for various Fiscal and Non Fiscal purposes.
5.2 In 1995 the Raja Chelliah Committee on Tax Reforms has recommended establishment of a Central Valuation Board for valuation for Stamp Duty purpose. But it is far more advisable to constitute an autonomous Central Valuation Board for all fiscal and non fiscal purposes.
5.3 In 1996, the Ministry of Finance, Govt. of India appointed a committee under Chairmanship of Shri. H. P. Rannina for simplification and rationalization of Income Tax Act. One of the recommendations of the committee was as under :-
In our country all State Govts. carry out valuation for levying the stamp duty at the time of transfer of property. Therefore, this valuation be adopted for purpose of computation of Capital Gains Tax under Income Tax Act.
There was a strong representation against this amendment proposed
in the Finance Bill, 1998 on the ground that valuation carried out
by the stamp duty department throughout India is unscientific.
The representations point out that as the Circle Values fixed for
the purpose of stamp duty are arbitrary, a large number of bonafide
transactions shall be affected by the proposed amendment. The Value
of properties fixed by state government does not always represent
the fair market value. I agree with the apprehensions expressed in
this regard and hence withdraw the proposal to calculate Capital gains
tax on the basis of circle rates of stamp duty.
A. Jurisdiction of the Central Valuation Board
Land is a concurrent subject according to the constitution. The Central Valuation Board established under enactment by Govt. of India shall therefore have jurisdiction over Union Territories, all Central Govt. Depts. and all the Public Sector undertakings managed/controlled by the Govt. of India, irrespective of their locations in various states.
The Central Govt. may either direct/advise all the State Govts. to set up State Valuation Boards by passing suitable legislation on the lines of the Act passed by the Govt. of India OR after obtaining necessary concurrence/powers from the State Govts. may pass necessary legislation to establish Central Valuation Board and State Valuation Boards extending their jurisdiction over the entire country.
B. Benefits Of The Central Valuation Board