T.D Sugla, J.:— This reference raises only one question of law at the instance of the assessee. The question reads thus:
“Whether, in the absence of any specific rule under the Gift-tax Act providing for the manner of valuation of unquoted equity shares, the Tribunal was in error in looking into rule 1D of the Wealth-tax Rules, 1957, as a guide for the purposes of ascertaining, in accordance with the recognised break-up method of valuation of shares, the market value of unquoted equity shares, of Surat Cotton Spg. and Mfg. Wvg. Mills (P.) Ltd., as on the date of the gift?”
2. The assessee is an individual. During the previous year relevant to the assessment year 1969-70, she had, inter alia, gifted 2,250 ordinary shares of Surat Cotton Spinning and Weaving Mills Pvt. Ltd. to three donees, viz., a trust and two members of her family. The paid-up value of the shares was Rs. 75 each. In her gift-tax return, she declared the value of the gifted shares at Rs. 254 per share as the market value of the shares computed in accordance with rule 1D of the Wealth-tax Rules, 1957. At the time of assessment, however, she claimed that the fair market value of the shares should be taken at Rs. 173 per share on the basis of the value determined by the valuers for wealth-tax purposes in terms of section 24(6) of the Wealth-tax Act, 1957, in the case of the Trustees of Maithili Family Trust for the assessment year 1967-68.
3. The departmental authorities as well as the Tribunal held that the fair market value of the unquoted shares was required to be computed in accordance with rule 1D of the Wealth-tax Rules. In so doing, the Tribunal distinguished the Supreme Court decision in the case of CWT v. Mahadeo Jalan, [1972] 86 ITR 621, on the ground that the assessments involved in that case were the assessment years 1957-58 and 1958-59 when rule 1D was not on the statute book. Further, according to the Tribunal, there was a direct decision of the Mysore High Court in the case of Krishnamurthy, [1974] 96 ITR 87, dealing with rule 1D of the Wealth-tax Rules in the context of section 36 of the Estate Duty Act. Following the said decision, the Tribunal confirmed the order of the departmental authorities in this regard.
4. It is submitted before us by Shri Kolah, learned counsel for the asses-, see, that the Supreme Court decision in CWT v. Mahadeo Jalan, [1972] 86 ITR 621, is clearly applicable and that the fact that the assessment years 1957-58 and 1958-59 were involved in that case was not relevant. He pointed out that following its said decision, the Supreme Court, in a recent decision in Commissioner Of Gift Tax, Bombay v. Smt Kusumben D. Mahadevia , [1980] 122 ITR 38, in terms, held that in the case of a company shares of which are not quoted at the stock exchange, shares need not be valued on the break-up method in terms of rule 1D of the Wealth-tax Rules, if the company is a going concern. It was held that the profit-earning method was the only method which could properly be applied for arriving at the valuation of the shares in such a case. In the instant case also, the assessee is a shareholder of a company which is an investment company and a going concern as in the Supreme Court case. There is no suggestion that the company is being wound up or there is any possibility of its being wound up in the near future. Under the circumstances, we have no hesitation, following the Supreme Court decision, in answering the question in the affirmative and in favour of the assessee and we do so. No order as to costs.
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