Mandatory break-up valuation of unquoted shares created a referable question of law under wealth-tax rules.

Valuation of unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957 raised a substantial question of law because the later authoritative position required the break-up method to be applied mandatorily. The controversy over whether yield basis alone could be adopted, and whether rule 1D was merely directory, was therefore referable under section 27(3) of the Wealth-tax Act, 1957. The Tribunal's refusal to state the case was unsustainable, and it was directed to refer the common question of law for opinion.

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Issues: Whether a referable question of law arose on the valuation of unquoted equity shares under rule 1D of the Wealth-tax Rules, 1957, so as to warrant a direction to the Tribunal to state the case under section 27(3) of the Wealth-tax Act, 1957.

Analysis: In view of the later authoritative ruling that valuation of unquoted shares must be made on the break-up method under rule 1D mandatorily, the controversy as to whether the yield basis alone could be adopted and whether rule 1D was merely directory disclosed a substantial question of law. The refusal of the Tribunal to state the case was therefore unsustainable.

Conclusion: A referable common question of law existed, and the Tribunal was directed to state the case and refer the questions for opinion.

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