Advisory Services
Armslength Advisors delivers independent and reliable compliance valuation services for regulatory reporting, taxation, FEMA compliance, insolvency matters, and statutory requirements across industries.
Our Services
We provide a comprehensive suite of valuation services to ensure compliance with various regulatory requirements under Indian law. Our team of certified valuers and domain experts deliver defensible, well-documented valuation reports in accordance with applicable statutes and guidelines.
Our key compliance valuation services includes :
Below is a brief description of each of our compliance valuation services,
Pursuant to the landmark Supreme Court judgement in Vodafone case, Finance Act 2012 introduced a deeming fiction under section 9 of the Income Tax Act, 1961 (“the Act”) to bring indirect transfer of Indian assets within the tax net, subject to certain thresholds/ exemptions.
The provisions of Section 9(1)(i) of the Act, when read in conjunction with Explanations 4, 5, 6, and 7 (collectively referred to as the indirect transfer provisions), state that a capital asset, being a share or interest in a foreign entity, shall be deemed to be located in India if such a share or interest derives its value ‘substantially’ (either directly or indirectly) from assets situated in India. According to Explanation 6(a), a share or interest shall be considered to derive its value substantially from assets (whether tangible or intangible) situated in India if, on the specified date, the value of such assets—
(i) exceeds the amount of ten crore rupees; and
(ii) represents at least fifty per cent of the value of all the assets owned by the company or entity, as the case may be;
Further, as per Explanation 6(b) the value of an asset shall be the fair market value as on the specified date, of such asset without reduction of liabilities, if any, in respect of the asset, determined in such manner as may be prescribed;
Accordingly, in case of an indirect transfer of shares of an Indian company, one needs to obtain a valuation report to determine the value that the foreign entity derives from Indian assets basis the prescribed guidance/ methodology.
Purpose of Valuation
The determination of Fair Market Value of assets is one of the critical factors for analysing applicability of ‘indirect transfer’ provisions under the IT Act.
Rule 11UB specifies the manner of determination of Fair Market Value of assets located in India as well as the Fair Market Value of global assets of the foreign company or entity.
According to ITA Section 56(2)(viib), tax is due on the amount above Fair Market Value (FMV) of shares in case a privately held corporation issues them at a price higher than FMV. This provision is now applicable for the issuance of shares to both residents and non-residents as per the Finance Act 2023.
Rule 11UA(2)(b) prescribes the method of calculating the Fair Market Value for the purposes of section 56(2)(viib).
When an owner of unquoted equity shares (“Shares”) in a Company transfers the shares to any person, he is required to pay Capital Gain tax on the difference between the sale consideration received by him and the cost of acquisition of such shares (or the inflation indexed cost, wherever applicable).
It is important to check if the “Sale consideration” that he receives from the buyer is at least equal to or more than the “Fair Market Value” (“FMV”) as defined under Rule 11UA of The Income Tax Rules, of the shares sought to be transferred.
The term transfer pricing refers to the rules and methods for pricing transactions between related parties e.g. Holding – Subsidiaries or enterprises under common ownership or control.
Purpose of Valuation
According to the Income-tax Act, 1961, the arm’s length principles shall be applied for computation of income arising from such transactions. Estimation of Arm’s length price is different from Fair value measurement.
As per the requirements of transfer pricing regulations, the valuation for estimation of arm’s length requires a subjective, entity-specific valuation.
When Required?
Estate planning is the process of transferring assets, money, and property to subsequent generations, heirs or nominated beneficiaries Assets can be transferred when the donor has passed away or is still alive. When the donor is still alive, the transfer is referred to as a “gift.”
Bequeathing assets involves tax implications and hence for the purpose of any transfer in the nature of gift or estate transfer, it is important to assign a value which can then be taxed to facilitate the transfer in compliance with tax regulations. Since most of these assets of not have a ready market, their fair market value must be determined through the adoption of alternate means.
Purpose of Valuation
Appointment of third-party valuation experts ensures an accurate estimate of the fair values of the gifts and assets involved and thereby greatly reduces the chance of underpayment of taxes thereon. This can help to avoid penalties levied on underpayment or avoidance of taxes upon transfer
When Required?
When the shares of an Indian Entity is issued or transferred to a non- resident or transferred by a non- resident to a resident, the transfer of such capital instruments are regulated under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
This regulation permits the person resident outside India, holding capital instruments of an Indian company or units in accordance with these Regulations to transfer the same to a person resident in India or vice versa by way of sale at value prescribed by the pricing guidelines.
Issue of shares by an Indian company or transferred from a resident to non-resident – Price should not be less than the FMV.
As per the pricing guidelines under FEMA, the transfer by way of sale shall be done at an arm’s length price which should be valued as per any internationally accepted pricing methodology.
The Companies Act 2013, a pivotal piece of legislation in India, establishes various provisions and regulations that govern the operation of companies. Among these, the valuation requirements hold significant importance in different contexts, such as the preferential allotment of additional shares, non-cash transactions, compromises or arrangements, the acquisition of minority shareholdings, and the submission of reports by Company Liquidators. In this article, we will explore the key aspects of valuation under the relevant sections of the Companies Act 2013. Below are the scenarios where valuation under the Companies Act is mandated.
Armslength is a Registered Valuer Entity (RVE) and its team is well equipped to carry out the valuation in accordance with the provisions of the Companies Act, 2013.
The Securities and Exchange Board of India (SEBI) plays a critical role in safeguarding investor interests and promoting transparency in the Indian stock market. One key mechanism for achieving this is by mandating valuations for various transactions undertaken by listed companies.
SEBI valuations are essential in the Indian capital market for the following reasons:
Market Transparency: Regular and accurate valuations enhance transparency by giving investors a clearer understanding of a company’s financial status and the true value of its shares.
Investor Protection: Reliable valuations safeguard investors from being misled by manipulated share prices during activities such as preferential allotments or debt restructuring.
Fair Pricing: Valuations provide an objective and equitable basis for setting the price of shares or assets in various transactions, ensuring fairness for both companies and investors.
Compliance & Risk Management: Adhering to SEBI regulations helps companies avoid legal complications and penalties, reducing the risk associated with non-compliance.
Valuations are mandated under SEBI Regulations when a listed entity engages in any of the following transactions:
WHY CHOOSE US
Armslength Advisors Private Limited delivers independent, credible, and regulation-compliant valuation advisory services across industries and regulatory environments.
Our experienced team of Registered Valuers, Chartered Accountants, MBAs, and financial professionals combines technical expertise with practical regulatory understanding to deliver transparent, defensible, and compliance-focused valuation solutions.
Deliver reliable valuation insights aligned with regulatory and statutory requirements.
Provide transparent, independent, and compliance-focused valuation advisory services.
High-quality execution with professional integrity, accuracy, and regulatory compliance.
Connect with our valuation professionals for independent compliance valuation solutions tailored to your regulatory and reporting requirements.
