Section 11 — Fair market value of assets in certain cases

(1) The fair market value of asset, tangible or intangible, as on the specified date, held directly or indirectly by a foreign company or entity, for thepurposes of section 9(10) shall be computed as per this rule with reference to the specified date.
(2) Where the asset is a share of an Indian company listed on a recognised stock exchange on the specified date, the fair market value of the share shall be theobservable price of such share on the stock exchange so, however, that —
(a) if the share is held as part of the shareholding which confers, directly or indirectly, any right of management or control in the said company, the fairmarket value of the share shall be determined using the following formula: —Fair market value = (A+B)/C
Where,—A = the market capitalisation of the company on the basis of observable price of its shares quoted on the recognised stock exchange;B = the book value of liabilities of the company; andC = the total number of outstanding shares; or(b) if, on the specified date, the share is listed on more than one recognised stock exchange, the observable price of the share shall be computed withreference to the recognised stock exchange which records the highest volume of trading in the share during the tax year.(3) Where the asset is a share of an Indian company not listed on a recognised stock exchange on the specified date, the fair market value of the share shall be—
(a) the fair market value as determined by a merchant banker or an accountant as per any internationally accepted valuation methodology for valuation ofshares on arm's length basis; and(b) increased by the liability, if any, considered in such determination as per clause (a).
(4) Where the asset is an interest in a partnership firm or an association of persons, its fair market value shall be determined in the following manner:—
(a) the value of such firm or association of persons, shall be determined by a merchant banker or an accountant as per any internationally acceptedvaluation methodology as increased by the liability, if any, considered in such determination;(b) the value so computed in clause (a), as is equal to the amount of its capital, shall be allocated among its partners or members in the same proportion inwhich the capital has been contributed by them;(c) the residue of the value shall be allocated among the partners or members as per the agreement of partnership firm or association of persons fordistribution of assets in the event of dissolution of the firm or association;(d) in the absence of agreement, as specified in clause (c), the residual value shall be allocated in proportion in which the partners or members are entitledto share profits; and(e) the sum total of the amount so allocated as per clauses (a) to (d) to a partner or member shall be treated as the fair market value of the interest of thatpartner or member in the firm or the association of persons, as the case may be.(5) The fair market value of the asset other than those referred to in sub-rules (2), (3) and (4) shall be the price it would fetch, if sold in the open market asdetermined by a merchant banker or an accountant and increased by the liability, if any, considered in such determination.
(6) The fair market value of all the assets of a foreign company or an entity on the specified date, if conditions specified in column B of the following Tableare fulfilled, shall be determined as per column C thereof: —
TABLE
Sl.No. Conditions Fair Market Value
A B C
1. Where the transfer of share of, or interest in, the foreigncompany or entity is between the persons who are notconnected persons, for the purpose of such transfer.
Fair market value of all assets = A+BWhere,—
A = Market capitalisation of the foreign company or entity computed on the basis of thefull value of consideration for transfer of the share or interest; and
B = book value of the liabilities of the company or the entity as on the specified date ascertified by a merchant banker or an accountant.
2. Where the share of the foreign company or entity is listedon a stock exchange on the specified date.Fair market value of all the assets = A+BWhere,—
A = Market capitalisation of the foreign company or entity computed on the basis of theobservable price of the share on the stock exchange where the share of the foreigncompany or the entity is listed; and
B = book value of the liabilities of the company or the entity as on the specified date.
3. Where the share is listed on more than one stockexchange on the specified date. Fair market value of all the assets = A+BWhere, —
A = Market capitalisation of the foreign company or entity computed on the basis of theobservable price of the share on the stock exchange which records the highest volume oftrading in the share during the period considered for determining the price; and
B = book value of the liabilities of the company or the entity.
4. Where the share in the foreign company or entity is notlisted on a stock exchange on the specified date.Fair market value of all the assets = A+BWhere,—
A = fair market value of the foreign company or the entity as on the specified date asdetermined by a merchant banker or an accountant as per the internationally acceptedvaluation methodology; and
B = value of liabilities of the company of the entity if any, considered for thedetermination of fair market value in A.
(7) Where fair market value has been determined on the basis of any interim balance sheet referred to in rule 10(b)(ii), then the fair market value shall beappropriately modified after finalisation of the relevant financial statement as per the applicable laws and all the provisions of this rule and rules 12 and 235shall apply accordingly.
(8) For determining the fair market value of any asset located in India, being a share of an Indian company or interest in a partnership firm or association ofpersons, all the assets and business operations of the said company or partnership firm or association of persons shall be taken into account whether suchassets or business operation are located in India or outside.
(9) The rate of exchange for calculation in foreign currency, of the value of assets located in India and expressed in rupees shall be the telegraphic transferbuying rate of such currency as on the specified date.