Unquoted share valuation for gift tax turns on the latest completed balance-sheet, not a later year-end statement.

For valuing gifted unquoted shares under section 6 of the Gift-tax Act, the open-market value is to be estimated as on the date of gift. In the absence of special circumstances, the valuation should ordinarily be based on the latest completed balance-sheet and profit and loss account available to an honest seller, not on a later balance-sheet reflecting profits of the year still in progress. Because the shares were unquoted, the later balance-sheet nearer the gift date did not control valuation. The stated conclusion is that the completed previous year's balance-sheet value was the proper basis.

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Issues: Whether, for valuing gifted unquoted shares under section 6 of the Gift-tax Act, 1958, the relevant figure was the balance-sheet value as on the previous year-end or the later balance-sheet value nearer the date of gift.

Analysis: The value of gifted property had to be estimated as the price it would fetch in the open market on the date of gift. For unquoted shares, the hypothetical buyer would proceed on the information normally available to an honest seller on that date. In the absence of special circumstances, the seller could convey only the company's financial position reflected in the latest completed balance-sheet and profit and loss account, not profits of the year still in progress. Since the shares were not stock-exchange listed, the nearer date of the later balance-sheet did not control valuation.

Conclusion: The relevant value was the one shown in the balance-sheet for the completed previous year, and the Tribunal was correct in preferring that valuation; the question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: For unquoted shares gifted before the close of the accounting year, open-market value under section 6 is ordinarily determined with reference to the latest completed balance-sheet and profit and loss account, unless special circumstances justify a different valuation.

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