Representation submitted to CBDT by Direct Taxes Committee of ICAI for making Chartered Accountants ineligible to determine the FMV of unquoted equity shares..
ICAI submitted Representation before CBDT regarding Valuation Certificate
Re: Notification No 2312018, dated 24th May, 2018 amending Rule 11 VA omitting reference to term “accountant”, thereby making Chartered Accountants ineligible to determine the FMV of unquoted equity shares as per the Discounted Free Cash, Flow Method
We have been writing to you from time to time on various issues faced by the assessees in respect of tax matters. Through this letter. we wish to bring to your kind attention the issues and concerns of ICAI in respect of Notification No. 23/2018, dated 24th May, 2018 amending Rule 11 UA omitting reference to the term ‘Accountant’ thereby permitting only a merchant banker to determine the FMV of unquoted equity shares as per the Discounted Free Cash Flow Method.I CAI is unable to appreciate the rationale of this notification, which may not be in the interest of the assessees.
CAI, being a partner in nation building. has always been consulted when such changes are being given effect to. With regard to this notification, we wish to make our detailed submissions in respect of the following initiatives/ concerns of ICAI. The detailed submissions ” have been annexed to this letter.
 

• Preparation and Issuance of Valuation Standards by ICAI – as a benchmark for Valuation Practices applicable for Chartered Accountants, predominantly recognised role of ICAI in COl1J\ection with Valuation Standards and systematic training imparted to CA students as a part of course curriculum as also in post qualification course to CAs;
• Professional competence of Chartered Accountants – Recognition by Judicial Forum as sole expert in the area of accounting, auditing as well as connected valuations;
• Section 247 of the Companies Act, 2013 recognizes chartered accountant to be eligible for registering as a valuer;
• Very limited number of registered Intermediaries (Merchant Bankers) compared to large number of companies getting covered by the impugned Rule; Chartered Accountants entitled to be registered valuers under the Wealth Tax Rules;
• Valuation Standards Board of rCAI -Focus on in-depth and comprehensive activities performed by Chartered Accountants in respect of valuation;
• Recognition of Accountant in line with Rule,11 UA(1)(c)

It is pertinent to mention that limited avai I ability of the merchant bankers would further lead to increase in cost to the assessee for determining the FMV of unquoted equity shares. This, for sure, is neither the intent of the Government nor the same is in line with the objective of the Government of “ease of doing business”. Such a situation can be easily avoided if the said notification is reconsidered and status quo before the notification is maintained.
We hope that our concerns would be favourably considered and the said amendment in Rules 1 1 U and 11 UA will be reconsidered in the light of this representation.
 
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