Mandatory valuation under Rule 1D governed unquoted equity shares; Tribunal could not adopt a higher market-based value.

Rule 1D of the Wealth-tax Rules was mandatory for valuing unquoted equity shares, and the Tribunal could not replace that prescribed method with a higher market-based valuation drawn from transactions during the relevant year. The later Supreme Court position made clear that, except for specified categories, unquoted equity shares must be valued in accordance with Rule 1D. On that basis, the Tribunal erred in disregarding the rule, and the valuation was held to favour the Revenue and not the assessee.

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Issues: Whether, for valuation of unquoted equity shares under the Wealth-tax regime, the Appellate Tribunal was justified in ignoring Rule 1D of the Wealth-tax Rules, 1957 and adopting a higher value on the basis of some transactions during the relevant year.

Analysis: The shares in question were unquoted during the relevant assessment year. The Wealth-tax Officer had applied Rule 1D, while the Tribunal preferred a market-based value relying on certain transactions and an earlier view that was subsequently displaced. In view of the later Supreme Court ruling that Rule 1D is binding in all cases of unquoted equity shares, except the specified categories, the valuation method prescribed by the Rules could not be bypassed by adopting an alternative approach.

Conclusion: Rule 1D was mandatory and had to be applied to the unquoted shares. The Tribunal was in error in disregarding it, and the question was answered in favour of the Revenue and against the assessee.

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