Determination of fair market value of Property in India

By Vimal Punamiya

Accommodation Times News Services

The concept of “Fair Market Value” is most crucial and important from determining the validity or otherwise of the acquisition proceedings. In CIT vs. Arun Mehra 157 ITR 308 it was held that “when the initiation of proceedings depends on the market value of the property such initiation should not depend on a theoretical calculation of such value. What has to be seen is the market value, in the market and not the value calculated in an abstract manner applying a multiplier with reference to some unknown sale. Further in Joseph Valooran’s case reported in 108 ITR 544 it was held that “the fair market value is linked with the “price” the property would ordinarily fetch in the open market; i.e., the price a willing Purchaser would pay to the willing seller for a property, having due regard to its existing condition, existing advantages and its potential possibilities when laid out in its most advantageous manner.

The Supreme Court in the case of R.C. Cooper vs. Union of India ATR 1970 SC 546 has observed that the fair market value remains unaffected by the special needs of a particular purchaser.

The worlds “in the open market” used in the definition of fair market value does not contemplate actual sale or the actual state of the market but only enjoins that it should be assumed that there is an open market, and the property can be sold in such a market, and on that basis, the value has to be found out. The competent authority must assume that there is an open market in which such immovable property can be transferred. This view was expressed by the Supreme Court in Ahmed G.H. Ariff vs. CWT (1970) 76 ITR 471 (S.C.) and CWT vs. Purshottam N. Amersay (1969) 71 ITR 180 (Bom.) affirmed in Purshottam N. Amersay vs. CWT 1972 CTR (S.C.) 215; (1923) 88 ITR 417 (S.C.)

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