Mandatory valuation rules for unquoted shares prevail over yield basis valuation of ordinary and preference shares.

Rules 1C and 1D of the Wealth-tax Rules governing valuation of unquoted shares were treated as mandatory where those rules apply to non-listed shares. The court applied its earlier reasoning on rule 1D and extended the same approach to rule 1C for unquoted preference shares, rejecting a general yield basis valuation. The result was that ordinary, deferred and preference shares were not to be valued on yield basis when the statutory valuation rules governed the case.

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Issues: Whether rules 1C and 1D of the Wealth-tax Rules governing valuation of unquoted shares are mandatory, and whether the assessee's ordinary, deferred and preference shares were to be valued on yield basis.

Analysis: The reference concerned valuation of unquoted shares held by the assessee in a company not listed on any stock exchange and not an investment company. The Tribunal had treated rules 1C and 1D as not mandatory and had directed valuation on yield basis. The Court followed its earlier decision holding rule 1D to be mandatory and applied the same reasoning to rule 1C, which governs valuation of unquoted preference shares.

Conclusion: Rules 1C and 1D are mandatory, and the direction to value the shares on yield basis was not accepted. The question was answered in the negative and against the assessee, in favour of the Revenue.

Ratio Decidendi: Where the statutory valuation rules for unquoted shares are applicable, they must be given mandatory effect and cannot be displaced by a general resort to yield basis valuation.

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