Yield method for valuing shares in a going concern prevails over break-up valuation for wealth-tax purposes.

For shares in a private company that is a going concern, valuation is ordinarily to be made on the yield basis rather than the break-up basis. The Wealth-tax Officer had applied rule 1D of the Wealth-tax Rules, 1957 and adopted break-up valuation, but the Court followed the settled position that the going-concern character of the company calls for yield method valuation. The reference was answered in favour of the assessee and against the Revenue, holding the yield method to be the proper basis for valuing the shares.

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Issues: Whether the value of shares in a private company which is a going concern should be determined on the yield method or the break-up method.

Analysis: The shares were valued by the Wealth-tax Officer on the basis of rule 1D of the Wealth-tax Rules, 1957, treating the valuation as a break-up valuation, while the assessee contended that the yield method should apply. The Court relied on the settled position that, for shares in a going concern, valuation is ordinarily to be made on the yield basis and not on the break-up basis.

Conclusion: The value of the shares was required to be taken on the yield method, and the answer to the reference was in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue, affirming that the proper method of valuation for the shares in question was the yield method.

Ratio Decidendi: For shares in a going concern, the proper method of valuation is ordinarily the yield method and not the break-up method.

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