ISLAMABAD: Federal Board of Revenue (FBR) explained fair market value, which is the price which the property or asset would ordinarily fetch on sale or supply in the open market at that time.
The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) which explains the fair market value through Section 68.
Following is the text of Section 68 of the Ordinance, explaining the fair market value:
Section 68. Fair market value—
(1) For the purposes of this Ordinance, the fair market value of any property or rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time.
(2) The fair market value of any property or rent, asset, service, benefit or perquisite shall be determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash.
(3) Where the price “other than the price of immoveable property” referred to in sub-section (1) is not ordinarily ascertainable, such price may be determined by the Commissioner.
(4) Notwithstanding anything contained in sub-sections (1) and (3), the Board may, from time to time, by notification in the official Gazette, determine the fair market value of immovable property of the area or areas as may be specified in the notification.
(5) Where the fair market value of any immovable property of an area or areas has not been determined by the Board in the notification referred to in sub-section (4), the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty.
(6) In respect of immovable property—
(i) component A of the formula in sub-section (2) of section 37;
(ii) “consideration received” as mentioned in Division X of Part IV of First Schedule;
(iii) “value of immovable property” as mentioned in Divisions XVIII of Part IV of the First Schedule; and
(iv) valuation for the purposes of section 111 shall not be less than the fair market value as determined under sub-section (4) or (5).
Explanation—(1)For the removal of doubt, it is clarified that the fair market value as determined under sub-section (4) or(5) shall be for carrying out the purposes of this Ordinance only.
(2) It is further clarified that for the purposes of clauses (i) to (iv) of this sub-section if the fair market value determined under sub-section (4) or (5) is different than the auction price the applicable price shall be the higher of the two.