There has been a lot of confusion with regard to who is eligible to value and under what circumstances under Income Tax Act or Companies Act 1956 .
The Ministry of Corporate Affairs (MCA) has notified the provisions governing valuation by registered valuers section 247 of the Companies Act, 2013 (the Act)] and the Companies (Registered Valuers and Valuation) Rules, 2017 (the Rules), both to come into effect from 18 October, 2017.
Until effectiveness of section 247 of the Companies Act, 2013, the Valuation in case of Merger & Amalgamation has been done by Independent Merchant Banker registered with SEBI or Independent Chartered Accountant in practice having minimum experience of 10 Year (As specified in MCA Notification dated 14/12/2016).
The valuation by the registered valuer was to be effective from September 2018 but since the number of valuer was limited as on Septemer 2018 ,the date was further extended to another 4 months
Any person can render valuation services without a certificate of registration under these rules up to 31st January 2019 .
Thus after 31st January 2019 only a person registered as a registered valuer as per Section 247 read with relevant rules are eligible to do valuation of securities .
Under Income Tax Act 1961 the valuation rules are specifed under
Rule 11U, Rule 11UA, Rule 11UAA and Rule 11UB .
There are two options for valuation
a) Fair Market Value: Under this Method as per Rule 11U, there is no specific requirement that which person will do the valuation. Therefore, one can opine that any person can do the valuation for issue of shares on fair Market Value.
b) Discounted Free Cash Flow Method: Under this method only Merchant Banker can do the Valuation of Securities. Earlier, a Chartered Accountant was also permitted to determine the FMV of such equity shares. However, with effect from 24th May 2018, this right of Chartered Accountant is taken away and therefore only Merchant Banker is authorized to determine the FMV of such equity shares.
So in cash shares are issued at face value ,there is no need to obtain valuation report,the same is required if shares are issued at premium .
In case valuation of shares is done by DCF Method then only merchant banker report is required .
Also see the topic about efiling IncomeTax Return Form.
