Fair Market Value & PMLA

Court :- HIGH COURT OF ANDHRA PRADESH AT HYDERABAD , Citation :- [2011]164CompCas149(AP)
In the above case of B. Rama Raju, S/o B. Ramalinga Raju Vs. Union of India (UOI), [MANU/TN/1696/2011]; [(2012)1MLJ419], it was held that
 
……….. It is therefore clear that where a property is provisionally attached under Section 5, the person in possession of such property may avail the opportunity under Section 8 to indicate/establish that he has acquired the property attached (prima facie the proceeds of crime) out of his lawful earnings or assets, that he has the means to do so, and that his acquisition is therefore legitimate, bona fide and at fair market value of such property; and that the value paid for acquisition of the property and not the property in his possession that constitutes proceeds of crime, if at all.
 
The Hon’ble Supreme Court in the case K.P. Varghese v. ITO, (1981) 4 SCC 173, has held that:
 
“It is a well-known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess work and despite the utmost bonafides, the estimate of the fair market value is bound to vary from individual to individual.”
 
The Hon’ble Supreme Court in the case Jawajee Nagnatham v. Revenue Divisional Officer, (1994) 4 SCC 595, has held that
 
Basic Valuation Register prepared and maintained for the purpose of collecting stamp duty has no statutory base or force and it cannot form a foundation to determine the market value mentioned thereunder in instrument brought for Registration. The relevant extract from the judgement is under:
 
“5. The question, therefore, is whether the Basic Valuation Registration is evidence to determine the market value……………………………………..
 
Section 47A conferred no express power to the government to determine the market value of the lands prevailing in a particular area, village, block, District or the region and to maintain Basic Valuation Register for levy of stamp duly for Registration of an instrument, etc. No other statutory provision or rule having statutory force has been brought to our notice in support thereof. Whether an instrument is liable for higher stamp duty on the basis of valuation maintained in the Basic valuation Register, came up for consideration in Sagar Cements Ltd., Mattampalle v. The State of Andhra Pradesh (1989) 3 A.L.T. 677 . B.P. Jeevan Reddy, J., as he than was, considered the question and held that the government has unilaterally fixed the valuation of the lands, the Basic Valuation Register had no statutory foundation and therefore it does not bind the parties.
 
Neither the Registrar nor the vendor is bound by it. The market value of the land for proper stamp duty has to be determined as per the law under Section 47A itself. That view was followed by another learned single Judge in P. Shashidhar v. Sub-Registrar (1989) 3 A.L.T. 677. It is, therefore, clear that the Basic Valuation Register prepared and maintained for the purpose of collecting stamp duty has no statutory base or force. It cannot form a foundation to determine the market value mentioned thereunder in instrument brought for Registration.”
 
The Rajasthan High Court in the case Krishna Kumar Rawat and Ors. Vs. Union of India (UOI) and Ors., (2007)210CTR(Raj)553, has observed the various factors on which the actual market value of the property is determined. The relevant extract from the Judgement is as under:
 
“The various factors are there on the basis of which out of the various methods by which the valuation of the immovable property can be made, appropriate method is to be adopted. It depends on the location of the property, the purpose for which the property is used, the nature of the property, the time when the agreement is entered into and similar other objection factors. The valuation, therefore, has to be done by a method which is more objective and could furnish reliable data to arrive at a just conclusion.
 
In respect of land, comparable cases provide the better guide. The comparable cases could be which are in respect of the land having similar character and is in the proximity of the land under agreement having similar advantages and amenities. The proximity in time is also an important factor in such a case. The location, frontage, transport facilities and other amenities besides the size of the plot are relevant considerations. The method of belting is also applied in respect of and having a large area as the front of the land on the main side fetches a higher price than the next belt and so on. In this method, the plot is divided into belts on the basis of distance from the main road and the value of such belts has to be determined separately”
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