Section 3 in The Prohibition of Benami Property Transactions Rules, 2016
3. Determination of price in certain cases.
(1)For the purposes of sub-clause(ii) of clause (16) of the section 2 of the Act, the price shall be determined in the following manner, namely:-(a)the price of unquoted equity shares shall be the higher of,-(I)its cost of acquisition;(II)the fair market value of such equity shares determined, on the date of transaction, by a merchant banker or an accountant as per the Discounted Free Cash Flow method; and(III)the value, on the date of transaction, of such equity shares as determined in the following manner, namely:-The fair market value of unquoted equity shares = (A + B - L) × (PV)/ (PE)where,A = book value of all the assets (other than bullion, jewelery, precious stone, artistic work, shares, securities and immovable property) as reduced by,-(i)any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and(ii)any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;B = the price that the bullion, jewelery, precious stone, artistic work, shares, securities and immovable property would ordinarily fetch on sale in the open market on the date of transaction;L = book value of liabilities, but not including the following amounts, namely:-(i)the paid-up capital in respect of equity shares;(ii)the amount set apart for payment of dividends on preference shares and equity shares;(iii)reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;(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;(v)any amount representing provisions made for meeting liabilities, other than ascertained liabilities;(vi)any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;PE = total amount of paid up equity share capital as shown in the balance-sheet;PV = the paid up value of such equity shares;
