Mandatory break-up value method governs share valuation under Wealth-tax law; yield method cannot replace rule 1D.

For valuation of shares under the Wealth-tax Act, the mandatory break-up value method in rule 1D prevailed over adoption of market value on the yield method. The Supreme Court's ruling in Bharat Hari Singhania confirmed that fluctuations between the balance-sheet date and the valuation date do not make Explanation 1 to rule 1D inconsistent with section 7(1), and rule 1D applies even when those dates do not coincide. Because the earlier High Court view relied on by the Tribunal had been reversed, a question of law arose from the Tribunal's order, and the reference was answered against the assessee.

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Issues: Whether, for valuation of shares under the Wealth-tax Act, the Tribunal was correct in directing adoption of the market value on the yield method instead of the break-up value under rule 1D of the Wealth-tax Rules, 1957, and whether the reference question was academic.

Analysis: The Tribunal had rejected the Revenue's reference application by relying on an earlier Delhi High Court decision that was later reversed by the Supreme Court. In the light of the Supreme Court's ruling in Bharat Hari Singhania, it was held that fluctuations between the balance-sheet date and the valuation date do not render Explanation 1 to rule 1D inconsistent with section 7(1) of the Wealth-tax Act, 1957, and that rule 1D remains mandatory even when the valuation date and balance-sheet date do not coincide. Since the earlier view on which the Tribunal relied had been reversed, a question of law did arise from the Tribunal's order.

Conclusion: The question was answered in the negative, in favour of the Revenue and against the assessee.

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