Agricultural Land Under Valuation Rules, 2017: Who Is Qualified To Value What Law Forgot?

India holds millions of hectares of land within the corporate asset portfolios, yet the Companies (Registered Valuers and Valuation) Rules, 2017, which govern the entire framework for valuation of company assets, are silent about how the agricultural lands are to be valued, who is qualified to value them, and whether they fall within any prescribed asset class. This silence constitutes not just a minor oversight- a significant legislative void with far-reaching consequences for registered valuers, corporate entities, leaving all lending institutions holding agricultural land.The Companies (Registered Valuers and Valuation) Rules, 2017 (“the Rules”) notified by the Ministry of Corporate Affairs vide order dated 23rd October, 2017, represent a significant legislative step towards institutionalizing asset valuation under the Companies Act, 2013, delegating powers under section 247 of the Act, which is principally governed by the Insolvency and Bankruptcy Board of India (IBBI) acting as an “authority” to recognize Registered Valuers Organizations (RVO) and individual registered valuers. Valuation examinations prescribed under such rules and the Companies Act, 2013 are, mandated as a prerequisite to be a registered valuer. As per Section 2(c) and in accordance with Schedule IV of The Rules, the valuation is conducted for three asset classes, namely Plant and Machinery, Land and Building, and Securities or Financial Assets.Within the ambit and scope of such a capital asset, Land and Building, there is no clear distinction as to how the term agricultural land shall be construed. This article examines whether agricultural land falls within the asset class of Land and Building under section 8 of the Rules and whether the current framework is equipped to govern its valuation.AGRICULTURAL LAND: OUTSIDE THE AMBIT OF 'LAND AND BUILDING'Section 8 of the Companies (Registered Valuers and Valuation) Rules, 2017 pertains to the conduct of valuation and sets out the obligations of valuers. Under Section 8(1) of The Rules, the registered valuer shall comply with all the necessary requirements under the Rules with special reference to compliance standards mentioned under Rule 18 of the Rules. Additionally, under Section 8(1)(a) and 8(1)(b), the registered valuer must undertake the valuation as per internationally accepted valuations and valuation standards adopted by registered valuer organizations (RVO's) respectively. However, with respect to agricultural land, there is no explicit mention in any of the asset classes. If agricultural land is not recognized within any prescribed asset class, the registered valuer is left without applicable standards, without RVO guidance, or basis to conduct the valuation.As per section 8(2), the registered valuer may take assistance of any other expert or expert body for conducting such a valuation and even get a separate valuation for an asset class conducted by another registered valuer. However, the liability against such conduct of valuation would remain against the first-mentioned registered valuer. Section 8(2) of the Rules, presupposes that the registered valuer can identify the asset class of the property being valued because without identification, the valuer cannot determine whether to seek external assistance at all. If agricultural land finds no recognition in the prescribed asset classes, this presupposition collapses entirely, leaving the valuer without a legitimate basis to even invoke the assistance mechanism that Section 8(2) provides.Furthermore, Section 2(c) defines asset class only as a genus, and read with schedule IV, which pertains to the generic qualifications and eligibility of Land and Building valuers requiring experience of not less than five years in civil engineering architecture or town planning, additionally, post graduate in these courses and even valuation in full time Real Estate Valuation leaving an entire category of land without any prescribed qualification, creating a structural vacuum within the Rules.Section 2(14) of the Income Tax Act, 1961, defines a capital asset as a property of any kind held by an assesse, whether or not connected with his business or profession, but expressly excludes agricultural land from its scope. It has also been explicitly mentioned under section 194LA, explanation (i) that defines 'agricultural land', further explanation (ii) defining 'immovable property'- “means any land (other than agricultural land) or any building or a part of a building”. Agricultural land is thus expressly excluded from the definition of 'capital asset' under the Income Tax Act, 1961, and is construed as a category distinct from Land and Building, placing it outside the scope of 'capital asset' altogether.This can be further supported by the judgment of CIT v. Green Gold Tree Farmers (P.) Ltd. [2008] 299 ITR 262, the Hon'ble High Court of Uttarakhand held that whether land qualifies as agricultural land must be determined with reference to Section...

Agricultural Land Under Valuation Rules, 2017: Who Is Qualified To Value What Law Forgot?

Bhavik Jain

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