[Opinion] Valuing Art In Light of Section 132 of the Income Tax Act 1961

Nitesh Shrivastava – [2024] 161 taxmann.com 626 (Article)

Section 132 of the Income Tax Act grants the tax officials broad authority to inspect and confiscate books of account, papers, money, jewelry, and other valuable items. However, when exercising their rights, tax authorities must adhere to a prescribed protocol. The Income Tax Act talk about the valuation of the property/assets. Artworks/paintings/antiquities/artifacts are also considered to be the part of the assets in terms of the Income Tax Act 1961.

Finding an artwork’s distinct cultural and monetary worth is the process of art valuation. One can decide a fair and equitable price for the artwork that accurately reflects its genuine worth by considering its historical, artistic, and social context. In the present art market, it takes knowledge and experience to calculate an art worth for your piece of art. When it comes to pricing the art, there is no one-size-fits-all method. Thus, the question of where to start now arises particularly in terms of art.

It should go without saying that it might be challenging to consider something that may have significant personal meaning for one in an unbiased manner. And to place a price on it is even more difficult. One will need to address the cost of his creativity with more pragmatism, even if it could be rather heartbreaking. This implies setting prices based less on subjective judgment and more on tangible, observably quantifiable criteria. What persons consider to be valuable about artworks has often tracked what they take artworks to be. In the humble beginnings of the artwork, artworks were taken to be accurate representations of the world or to be a beautiful, skillful creation that may also have served religious or political functions.

Different artworks manifest different kinds of composite values. The philosopher of art’s task is to examine which values can appropriately be considered determinants of artistic value and, subsequently, what the value of art might be beyond these determinants. There is substantial disagreement about which, and how, determinants affect artistic value.

Here comes the role of the Government Approved Valuer to assess the art work with a more sensible and legal way. Valuation of paintings is indeed a critical task that requires expertise and knowledge in the field of art. The value of a painting is determined by various factors, including the artist’s reputation, the artwork’s provenance, its condition, rarity, historical significance, and current market trends.

It is important to note that art valuation is subjective and can vary based on individual opinions and market fluctuations. Professional art appraisers, art historians, dealers, auction houses, and galleries often consult the Government Approved Art Valuers to provide their expert opinion and conduct thorough research to determine the value of art works. Although amongst all, the Government Approved Valuer is the only licensed person whose reports are duly acceptable by the Income Tax Department during the search and seizure specifically under 132 of the Income Tax Act.

The income tax department has invariably handful of powers of the search and the seizure under the Income Tax Act 1961.

New Amendment to Section 132

According to Section 132 of the Income-Tax Act, 1961, tax authorities are able to search and seize people and property without first obtaining a court order if they have a “reason to believe” that the individual has hidden or avoided paying taxes. Section 132 empowers search and seizure subject to the fulfilment of conditions specified therein. The pre-amended sub-section (2) allows the authorized person to requisition services from a police officer or any other officer of the Central Government to assist in conducting work. Similarly, the pre-amended section (9D) empowers the authorized officer to make a reference to a valuation officer under section 142A for estimating the fair value of the property.

The Finance Act 2023 amended sections 132(2) and 132(9D) to increase the scope of the respective powers of the authorized officers.

Section 132(2) was amended to include that the authorized person may requisition for the services of any person or entity from different walks and strata with the prior approval from CIT/PCIT/CCIT/PCCIT, Principal Director General or Director General.

Similarly, section 132(9D) was amended, empowering the authorized officer to requisition the services of any person or entity or any registered valuer in addition to the reference made to the Valuation Officer in accordance with section 142A with the prior approval from CIT/PCIT/CCIT/PCCIT, Principal Director General or Director General.

The Central Board of Direct Taxes (CBDT) has inserted Rules 13 and 13A to the Income-tax Rules, 1962 to implement the said amendments.

Click Here To Read The Full Article