Break-up method valuation of unquoted shares in deemed gift cases follows the relevant transaction-date balance-sheet

For valuing unquoted shares under the break-up method in a deemed gift case, the relevant balance-sheet was the one linked to the transaction date, and the assessee could use the balance-sheet ending 31 March 1978. The High Court followed an earlier Division Bench view, which in turn aligned with the Kerala High Court approach, and held that no contrary authority justified departure from that interpretation. The valuation was therefore computed on that basis, and the question was answered in favour of the assessee and against the Revenue.

---

---

Issues: Whether, for valuing unquoted shares for determining deemed gift, the relevant balance-sheet was the one as on 31 March 1978 or 31 March 1979.

Analysis: The valuation dispute turned on the proper application of the break-up method in the context of a deemed gift under the Gift-tax Act. The Tribunal followed the view that the balance-sheet available on the date relevant to the transaction could be used, and that the assessee could rely on the balance-sheet ending 31 March 1978 for valuing the shares. The High Court noted that an earlier Division Bench had already adopted the same approach by following the Kerala High Court view, and no contrary authority was shown to warrant departure from that binding interpretation.

Conclusion: The relevant balance-sheet for valuation was the balance-sheet as on 31 March 1978, and the question was answered in favour of the assessee and against the Revenue.

Final Conclusion: The reference was disposed of by affirming the assessee-friendly method of share valuation for determining deemed gift.

Ratio Decidendi: For valuation of unquoted shares under the break-up method in a deemed gift case, the balance-sheet relevant to the transaction date, as applied in the binding precedent, governs the computation where no contrary view is established.

---