Unquoted share valuation follows open market value principles, with rule 1D serving as a valid guide for private companies.

Open market value governs the valuation of unquoted shares under the Estate Duty Act, and section 37 operates as a special application of that principle for private companies with transfer restrictions. On that basis, the valuation should ignore restrictive articles of association for valuation purposes, and rule 1D of the Wealth-tax Rules, 1957 may be used as a recognised guide where it reflects the proper valuation basis. The valuation is to be derived from the last published balance-sheet and other reliable material available on the valuation date, rather than later accounts or later-acquired material. The text states that the accountable person's valuation was accepted and the departmental valuation was not sustained.

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Issues: Whether the valuation of unquoted shares in a private company with restrictive articles of association was to be made under section 37 of the Estate Duty Act, 1953 by reference to the open market value principle in section 36(1), and whether the valuation method under rule 1D of the Wealth-tax Rules, 1957 could be adopted.

Analysis: The provisions of section 37 were treated as a special rule operating within the broader open market valuation principle in section 36(1), requiring the shares to be valued on the footing that transfer restrictions were ignored for valuation purposes. On that basis, the method recognised in rule 1D of the Wealth-tax Rules, 1957 was held to be a valid guide for valuing unquoted shares under the Estate Duty Act. The valuation was also linked to the last published balance-sheet and other reliable available material rather than later accounts or material not properly available on the valuation date.

Conclusion: The accountable person's valuation was accepted and the departmental valuation was not sustained.

Final Conclusion: The appeal succeeded and the assessment was directed to be modified in accordance with the assessee's valuation method.

Ratio Decidendi: For valuation of unquoted shares under the Estate Duty Act, the open market value principle governs, section 37 operates as a special application of that principle for private companies with transfer restrictions, and rule 1D methodology may be used as a recognised guide where it reflects the proper valuation basis.

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