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Please Help: Share valuation of unquoted shares under rule 11UA (c) (b) of Income Tax Rules, 1962

Posted Date : 22-Feb-2012 , 02:56:44 pm | Posted By: Somya Bansal

Category : Income Tax | Answers : 3| Comments : 0| Hits: 1746

I have a query regarding Rule 11UA (c) (b) Income Tax Rules, 1962. Under this Rule, share valuation of unquoted shares is done for Income Tax purpose. In valuation we have to take book value of assets reduced by Advance tax, profit and loss(dr.) balance, and any amount shown in balance sheet which does not represent the value of any asset. Now, in our case an item in balance sheet naming Capital work in progress of a site is shown after capitalising borrowing cost(finance cost), network cost ( site rent, maintenance, power & fuel, MNP and other cost) and payroll cost (salary etc). Do these costs can be held as unrealisable value of an asset and could be reduced from total assets for valuation purpose????? Same cost have been incurred and capitalised and shown as an item of fixed asset and depreciation is charged on it. So what treatment can be for these cost in valuation? Can it be reduced from total assets by considering it as an amount not representing any asset?

Dear Somya, I think it i.e capital work in progress should not be reduced from total assets. WIP should be the part of fixed assets and you are treating the same and claming the depriciation. WIP is the part of book value of assets and for valuation purpose under rule 11UA(c)(b) it should be part of it.
Also it is wrong to say that Capital WIP is not represent any assets. Because capital WIP means assets under development/construction.
   Answer by: Rambabu Senkarasetti
I agree with above answers.

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