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.

(B) The non-fiscal purposes are :-

  1. Grant and recovery of loans and advances by Banks.
  2. Insurance of Immovable and Movable property.
  3. Award of compensation for compulsory acquisition of property for public purposes.
  4. Computation of betterment levies under town planning laws.
  5. Valuation of tangible and intangible assets owned by the Govt. of India, State Governments, Public Sector undertakings and statutory bodies like port trusts, for privatisation as well as ascertaining return on investment.
  6. Liquidation of assets for recovery for settlement of financial disputes by commissioner, High Courts and Official Liquidator.
  7. Computation of rent at the time of leasing of property and subsequent renewal of leases in Government/Semi Government organisation.

At present the above functions are discharged by officers as indicated at Annexure-‘A’ who are not qualified in valuation. (Page No.9)

3.0 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 is considered only as a part of discipline of Engineering and Architecture while in reality valuation transcends this disciplines and requires good knowledge of law, economics, accountancy, town planning, environmental science. Hence, in India Engineers and Architects are engaged in valuation without knowledge of law, economics, accountancy etc.

In India, we do not have any Legislation to regulate the Profession of Valuation, with the result there is no professional accountability by valuers.

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.

However, this registration is used for valuation for all purposes.

3.1 The qualifications laid down for registration as a Valuer of immovable property under Wealth       Tax Act 1957 are :-

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
- architectural or structural designing of buildings or
- construction of buildings or development of land or
- valuation of buildings and Urban Landsor
- lecturer preparing students of civil engineering

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
-rendered service as mechanical or electrical engineer. or
-practice as a consulting engineer or
-valuer of machinery and plant

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.

According to section 4(3) of Valuers Act of New South Wales – Australia :-
“ A person who carries out a Valuation of land in the course of and incidentally to the performing of services as an Architect, Civil Engineer, a Surveyor or Quantity Surveyor is not a Real Estate Valuer with respect to that valuation if any fee or reward paid or payable in respect of these services is wholly or principally attributable to the performing of services other than the carrying out of that valuation.”

(b) The qualifications laid down in Valuers Act of Malaysia are :-

  • B.A (Land Economy)
  • B.Sc. (Estate Management)
  • B.Com (Property)
  • Bachelor of Valuation and Property Management
  • B.Sc. (Valuation and Property Management)

(c) 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.
(d) Similarly in U.K. and Canada, in order to practice as a valuer one has to be a member of      professional valuation society. Membership to the professional valuation society is available to      persons possessing academic qualification in valuation coupled with experience in valuation.
(e) In U.S.A. each state has got its own licensing requirement to register as ‘licensed appraisers’      and  ‘certified appraisers’ to value different types of properties – residential, commercial and      industrial. Licence is granted only to trained appraiser.
(f) According to International Valuation Standards Committee valuers are those who deal with the      special discipline of economics.

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.

3.8 There are few handful of people in the country who have passed this examination.

3.9 Thus, the practicing Valuers in the country are either Architects or Engineers or Town Planners       who do not posses the knowledge of the disciplines of valuation indicated above, whereas to       do a proper job of valuation, a Valuer must have knowledge of economics, town planning, law,       accountancy, insurance, environmental science and engineering.

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.

On 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.
The response to distance learning courses is encouraging which is evident from the fact that practising valuers and officers of valuation departments are amongst the applicants for admission to first batch.

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.

4.3 The Central Board of Direct Taxes, Ministry of Finance Government of India, in recognition of       the comprehensive nature of these courses have reduced the experience criterion from TEN       years to TWO years for holders of these Masters Degrees for registration as approved valuers       for Immovable Property, Plant and Machinery under Section 34 AB of Wealth Tax Act,       1957.This is a step in right direction.

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.

(iv) To regulate and control the conduct and work of the Professional Valuers.
(v) To minimise litigation relating to valuation and provide for arbitration in suitable cases.

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
- Revaluation of industrial properties
- Valuation of Public properties for the purpose of administration, purchase

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.
Hon’ble Finance Minister Shri. Yashwant Sinha dropped the above provision with following remarks (Ref. Budget speech of the year 1998):-

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.

6.0 It is necessary to constitute Central Valuation Board for carrying out valuation for various        Fiscal and Non Fiscal purposes mentioned under paragraph 2.0 as per the outlines enclosed at       Annexure-‘B’. (Page No.12)

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

  1. Benefits arising from establishment of the Central Valuation Board would be manifold and innumerable as compared to the cost, which may be incurred by Govt. for establishing and functioning of the Board, which will be very low/almost negligible due to its proposed nature/status as Service agency charging for all the services rendered by it to become almost self financing.
  2. Some of the major benefits envisaged are as under :-
    1. Valuation of properties would be estimated on scientific basis, considering all the facets of the subject matter.
    2. Such proper & scientific valuation, especially that of assets will enable the Central & State Govts., Semi-Govt, authorities, PSUs, etc. to take appropriate financial decision regarding their management such as making improvement in their efficiency, restructuring etc.
    3. Lead to minimising creation & accumulation of Non Performing Assets.
    4. Help in avoiding losses to Govt. in matters like disposal or.
      leasing or public properties, payment of compensation in land acquisition etc
      It may be worth to point out that the Govt. of Maharashtra has saved huge funds amounting to crores of rupees by successfully defending land acquisition matters in Dist. Courts & High Court on account of expert evidences led by valuation experts.
    5. Minimise litigations thereby avoiding loss of money & time to all concerned including Govts. Judiciary & private persons.
    6. Creation of Data Bank which will form permanent record providing scientific & objective basis for valuation.
    7. To achieve the goals identified under paragraph 4.4