Estate duty valuation of going-concern shares may rely on near-contemporaneous sale price; revoked liabilities are not deductible.

For estate duty valuation of shares in a going concern, the break-up method was rejected because an old balance-sheet did not reflect later appreciation in the company's land, buildings and machinery; the post-death sale price was treated as a reliable indicator of fair market value, so valuation at Rs. 1,500 per share was upheld. A claimed deduction of Rs. 2,55,000 was disallowed because the earlier marriage settlement had been revoked, the revocation deed created no fresh enforceable debt, and no subsisting liability existed on the date of death. The estate duty assessment was sustained.

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Issues: (i) Whether the shares in Shanthi Theatres Private Limited were correctly valued at Rs. 1,500 per share for estate duty purposes; (ii) Whether the sum of Rs. 2,55,000 was allowable as a deduction in computing the principal value of the estate.

Issue (i): Whether the shares in Shanthi Theatres Private Limited were correctly valued at Rs. 1,500 per share for estate duty purposes.

Analysis: The break-up value adopted from an old balance-sheet did not reflect the later appreciation in the value of the company's lands, buildings and machinery. The company was a going concern, so the break-up method was not appropriate in the circumstances. The post-death sale of shares by the accountable person at Rs. 1,500 per share provided a reliable indicator of the market value, and there was no satisfactory evidence of any material change in price between the date of death and the sale.

Conclusion: The valuation at Rs. 1,500 per share was upheld and the issue was decided against the accountable person.

Issue (ii): Whether the sum of Rs. 2,55,000 was allowable as a deduction in computing the principal value of the estate.

Analysis: The 1945 marriage settlement had been revoked by the 1954 deed with the wife's consent, and the revocation deed did not create any fresh enforceable obligation to pay Rs. 4 lakhs. The later note could not substitute for a binding document, and any alleged promise to pay after revocation was unsupported by consideration. The liability claimed as a debt therefore did not subsist on the date of death and was not deductible; the statutory objection under section 46(1)(a) also did not assist the accountable person.

Conclusion: The deduction of Rs. 2,55,000 was disallowed and the issue was decided against the accountable person.

Final Conclusion: The estate duty assessment was sustained, with both referred questions answered in favour of the Revenue.

Ratio Decidendi: For valuation of shares in a going concern, break-up value is inappropriate where it does not reflect real market conditions, and a contemporaneous or near-contemporaneous sale may be relied upon to determine fair market value; a claimed estate-duty deduction is unavailable where the alleged liability had been revoked and no enforceable debt subsisted at the date of death.

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