{"id":3607,"date":"2018-01-12T10:54:20","date_gmt":"2018-01-12T05:24:20","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=3607"},"modified":"2022-04-08T18:25:26","modified_gmt":"2022-04-08T12:55:26","slug":"valuation-of-unquoted-shares-an-analysis","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/valuation-of-unquoted-shares-an-analysis\/","title":{"rendered":"VALUATION OF UNQUOTED SHARES \u2013AN ANALYSIS"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69de54faef12c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69de54faef12c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/valuation-of-unquoted-shares-an-analysis\/#AN_ANALYSIS-_VALUATION_OF_UNQUOTED_SHARES\" title=\"AN ANALYSIS- VALUATION OF UNQUOTED SHARES\u00a0\">AN ANALYSIS- VALUATION OF UNQUOTED SHARES\u00a0<\/a><ul class='ez-toc-list-level-2'><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/valuation-of-unquoted-shares-an-analysis\/#NEW_SECTION_50CA\" title=\"NEW SECTION 50CA\">NEW SECTION 50CA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/valuation-of-unquoted-shares-an-analysis\/#AMEND_RULE_11UA\" title=\"AMEND RULE 11UA\">AMEND RULE 11UA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/valuation-of-unquoted-shares-an-analysis\/#Valuation_needs_under_various_Regulations\" title=\"Valuation needs under various Regulations\">Valuation needs under various Regulations<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"AN_ANALYSIS-_VALUATION_OF_UNQUOTED_SHARES\"><\/span><span style=\"color: #ff6600;\">AN ANALYSIS- VALUATION OF UNQUOTED SHARES\u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><a style=\"font-size: 1.13em; font-style: italic; font-weight: bold;\" href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Shares-TaxScan.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-8808\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Shares-TaxScan.jpg\" alt=\"www.carajput.com; Shares\" width=\"800\" height=\"460\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Shares-TaxScan.jpg 800w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Shares-TaxScan-300x173.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Shares-TaxScan-768x442.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/a><\/p>\n<p>Finance Act, 2017 inserted two new provisions under the Act- under Section 56(2)(x) section 50CA.<\/p>\n<p>The said sections were inserted to deal with a situation where the property, including unquoted shares, are being transacted for inadequate consideration much below the FMV of such property.<\/p>\n<p>Insertion of clause (x) in section 56(2) to provide that receipt of money or specified property by any person for inadequate consideration or without consideration from any person shall be subject to tax<\/p>\n<h2><span class=\"ez-toc-section\" id=\"NEW_SECTION_50CA\"><\/span><span style=\"color: #000080;\"><strong>NEW SECTION 50CA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 50CA to provide that where consideration for transfer of shares of a company other than a quoted share is less than the FMV of such share.<\/p>\n<p>The FMV determined as per the Rules shall be deemed to be the full value consideration for computing income under the head \u201c<a href=\"https:\/\/carajput.com\/blog\/where-assessee-had-already-started-construction-of-a-residential-house-within-one-year-prior-to-date-of-sale-of-land-and-utilized-entire-sale-consideration-within-three-years-from-date-of-transfer-of\/\">capital gains\u201d<\/a>.<\/p>\n<p>Explanation.\u2014For the purposes of this section, &#8220;quoted share&#8221; means the share quoted on any recognised stock exchange with regularity from time to time.<\/p>\n<p>where the quotation of such share is based on current transaction made in the ordinary course of business.&#8217;.<\/p>\n<p><strong><em><u>Read more about: <\/u><\/em><em><a href=\"https:\/\/carajput.com\/blog\/what-is-core-business-activity-in-gst\/\">What is core Business Activity <\/a><a href=\"https:\/\/www.caindelhiindia.com\/blog\/application-of-gst-on-contribution-by-rwa-members\/\">GST<\/a><\/em><\/strong><\/p>\n<p><strong><em><u>Read more about<\/u><u>: <\/u><\/em><em><a href=\"https:\/\/carajput.com\/blog\/all-about-gst-offenses-penalties-appeals\/\">All about GST Offenses, Penalties, and Appeals<\/a><\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"AMEND_RULE_11UA\"><\/span><span style=\"color: #000080;\"><strong>AMEND RULE 11UA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Amend Rule 11UA and to introduce Rule 11UAA for computing the FMV of unquoted shares of a company for the purpose of Sections 56(2)(x) and 50CA respectively.<\/p>\n<p>The fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner-<\/p>\n<p><strong><span style=\"color: #000080;\">The fair market value of unquoted equity shares =<\/span><\/strong><\/p>\n<p><span style=\"color: #000080;\"><strong> (A+B+C+D &#8211; L) \u00d7 (PV)\/ (PE)<\/strong><\/span><\/p>\n<p><span style=\"color: #000080;\"><strong>WHERE:-<\/strong><\/span><\/p>\n<p><strong>A<\/strong>= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance-sheet as reduced by,\u2014<\/p>\n<p>(i)any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and<\/p>\n<p>(ii)any amount shown as asset including the unamortized amount of deferred expenditure which does not represent the value of any asset;<\/p>\n<p><strong>B<\/strong> = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer;<\/p>\n<p><strong>C<\/strong> = fair market value of shares and securities as determined in the manner provided in this rule;<\/p>\n<p><strong>D<\/strong> = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property;<\/p>\n<p><strong>L<\/strong>= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:\u2014<\/p>\n<p>(i)the paid-up capital in respect of equity shares;<\/p>\n<p>(ii)the amount set apart for payment of dividends on preference shares and equity\u00a0 shares<\/p>\n<p><strong>where such dividends have not been declared before the date of transfer at a general body meeting of the company<\/strong>;<\/p>\n<p>(iii) Reserves and surplus, by whatever name called, even if the resulting\u00a0 \u00a0 \u00a0figure is negative, other than those set apart towards depreciation;<\/p>\n<p>(iv)any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;<\/p>\n<p>(v) Any amount representing provisions made for meeting liabilities, other than ascertained liabilities;<\/p>\n<p>(vi) Any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;<\/p>\n<p><strong>PV<\/strong>= the paid up value of such equity shares;<\/p>\n<p><strong>PE<\/strong> = total amount of paid up equity share capital as shown in the balance-sheet<\/p>\n<p>&nbsp;<\/p>\n<p>New Rule 11UAA prescribes that for the purposes of section 50CA, the FMV of the share of a company other than a quoted share, shall be determined as provided in Rule 11UA(1)(c)(b)\/(c), <strong>and that the reference to valuation date in the rule 11U and rule 11UA shall mean the date on which such shares are transferred.<\/strong><\/p>\n<p>the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assesses may obtain a report from a merchant banker or an accountant in respect of which such valuation.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Valuation_needs_under_various_Regulations\"><\/span><span style=\"color: #000080;\"><strong>Valuation needs under various Regulations<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>During our business or working careers, we&#8217;ve all had to deal with value concerns. In regulatory reporting, the Fair Value Concept is increasingly being applied. The complicated web of many legislation, as well as the necessity to comply with all of India, necessitates careful selection of the valuation method and the valuer.<\/li>\n<li>Here is a simple grid to address the needs of valuation in various regulatory environments and the valuation specialists recognised by the applicable regulation.<\/li>\n<li>We are confident that this grid will be valuable for startups, growing businesses, and mature compliance requirements.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-22214\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-1.jpg\" alt=\"Valuation Requirements under various Regulations1\" width=\"1024\" height=\"585\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-1.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-1-300x171.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-1-768x439.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-1-800x457.jpg 800w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-22215\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-2-.jpg\" alt=\"Valuation Requirements under various Regulations\" width=\"1024\" height=\"565\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-2-.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-2--300x166.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-2--768x424.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-2--800x441.jpg 800w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-22216\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-3.jpg\" alt=\"Valuation Requirements under various Regulations\" width=\"1024\" height=\"479\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-3.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-3-300x140.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-3-768x359.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2018\/01\/Valuation-3-800x374.jpg 800w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p><strong><span style=\"color: #000080;\">We are providing valuation services in the following area :\u00a0<\/span><\/strong><\/p>\n<ul>\n<li>Registered Valuer Services<\/li>\n<li>Income Tax &amp; Wealth Tax Valuation<\/li>\n<li>Valuation Consultancy<\/li>\n<li>Valuation for Stakeholders<\/li>\n<li>Valuation for Dispute Resolution<\/li>\n<li>Fairness Opinion<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>AN ANALYSIS- VALUATION OF UNQUOTED SHARES\u00a0 Finance Act, 2017 inserted two new provisions under the Act- under Section 56(2)(x) section 50CA. The said sections were inserted to deal with a situation where the property, including unquoted shares, are being transacted for inadequate consideration much below the FMV of such property. Insertion of clause (x) in &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[150],"tags":[794,795,792,793,1825,797,1824],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/3607"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=3607"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/3607\/revisions"}],"predecessor-version":[{"id":8809,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/3607\/revisions\/8809"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=3607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=3607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=3607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}