Unquoted share valuation follows yield method, and plant includes business apparatus for development rebate eligibility.

Unquoted shares in a continuing business are ordinarily valued on the yield or profit-earning capacity method, while break-up value is reserved for exceptional cases such as winding up. On that basis, maintainable profits and past dividend history were treated as a permissible valuation approach, and no capital gain was found to arise on the sale. The commentary also states that "plant" is to be construed broadly for development rebate purposes and can include business apparatus such as coal tubs, pipes and ropes, provided the statutory reserve requirement is met. The assessee's position was accepted on both issues.

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Issues: (i) Whether the valuation of unquoted shares for capital gains should be made on the break-up value method or on the basis of average maintainable profits and past dividends, and whether any capital gain arose on the sale. (ii) Whether coal tubs, cast iron pipes, winding and guiding ropes, and similar items qualified for development rebate as plant or machinery, subject to the reserve requirements.

Issue (i): Whether the valuation of unquoted shares for capital gains should be made on the break-up value method or on the basis of average maintainable profits and past dividends, and whether any capital gain arose on the sale.

Analysis: The valuation of shares in a running company is ordinarily governed by the yield or profit-earning capacity method, while the break-up value method is reserved for exceptional cases, such as where the company is ripe for winding up. The mere fact that the buyer and seller were connected did not justify treating the transaction as one requiring liquidation value. On the facts, the Tribunal had adopted a permissible and reasonable basis by considering maintainable profits and past dividend history.

Conclusion: The valuation adopted by the Tribunal was upheld and no capital gain was held to have arisen. The answer was in favour of the assessee.

Issue (ii): Whether coal tubs, cast iron pipes, winding and guiding ropes, and similar items qualified for development rebate as plant or machinery, subject to the reserve requirements.

Analysis: The expression "plant" is to be construed broadly, and includes items that form part of the apparatus used in the business, even if they are not mechanical machinery in the strict sense. Applying that principle, the disputed capital items fell within the scope of plant for the purpose of development rebate, subject to compliance with the statutory reserve condition.

Conclusion: The assessee was entitled to development rebate on the disputed items, subject to the reserve requirement. The answer was in favour of the assessee.

Final Conclusion: Both reference questions were answered in favour of the assessee, and the Tribunal's view was sustained on both valuation of shares and entitlement to development rebate.

Ratio Decidendi: For valuation of shares in a continuing business, the yield or profit-earning capacity method is ordinarily applicable, while break-up value is exceptional; and the statutory meaning of plant is wide enough to include business apparatus used in the operations of the undertaking.

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