Valuation of unquoted shares for estate duty may follow the break-up method using rule 1D guidance.

Where the Estate Duty Act, 1953 contains no specific rule for valuing unquoted shares, the principal value is to be estimated at the price they would fetch in the open market at the date of death. The break-up method is a recognised valuation approach, and rule 1D of the Wealth-tax Rules, 1957 was accepted as a statutorily recognised basis for applying that method to unquoted shares for estate duty purposes. The valuation made on that basis was upheld as justified on the facts.

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Issues: Whether the method of valuation prescribed under rule 1D of the Wealth-tax Rules, 1957, applies for valuation of unquoted shares held by the deceased for the purpose of estate duty.

Analysis: In the absence of specific rules under the Estate Duty Act, 1953, for valuing unquoted shares, the principal value has to be estimated at the price it would fetch in the open market at the time of death. The Court accepted that the break-up method is a recognised method of valuation and held that rule 1D, though framed under the Wealth-tax Rules, 1957, supplies a statutorily recognised basis for applying that method to unquoted shares for estate duty purposes. On the facts, the Tribunal was justified in upholding the valuation made by the Appellate Controller on that basis.

Conclusion: Yes. The method of valuation prescribed under rule 1D of the Wealth-tax Rules, 1957, is applicable for valuation of unquoted shares held by the deceased for the purpose of estate duty.

Ratio Decidendi: Where the Estate Duty Act contains no specific valuation rule for unquoted shares, the recognised break-up method may be applied by taking guidance from rule 1D of the Wealth-tax Rules, 1957, as a statutorily recognised measure of valuation.

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