Valuation of unquoted equity shares must follow Rule 1D's break-up method, not the yield method.

Rule 1D of the Wealth-tax Rules, 1957 requires unquoted equity shares to be valued by the prescribed break-up method where it applies, and not by the yield method. The Gujarat High Court stated that the Tribunal's direction to adopt the yield method was inconsistent with the governing valuation rule. The reference was therefore answered against the assessee and in favour of the revenue on the valuation method for gifted unquoted equity shares.

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Issues: Whether unquoted equity shares gifted by the assessee were required to be valued under rule 1D of the Wealth-tax Rules, 1957 or by the yield method.

Analysis: Rule 1D, as applicable to the relevant period, prescribes valuation of unquoted equity shares by the break-up method and is mandatory in nature. The Tribunal's direction to adopt the yield method was therefore inconsistent with the governing valuation rule.

Conclusion: The answer to the referred question was in the negative. The Tribunal was not right in directing the GTO to apply the yield method instead of rule 1D, and the issue was decided in favour of the revenue and against the assessee.

Final Conclusion: The reference was answered against the assessee on the valuation method for unquoted equity shares, and the matter stood disposed of accordingly.

Ratio Decidendi: Where rule 1D of the Wealth-tax Rules, 1957 applies, valuation of unquoted equity shares must be made by the prescribed break-up method and not by the yield method.

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