Unquoted share valuation: approved valuer's report accepted, and Rule 1D treated as directory for gift tax valuation.

Unquoted shares gifted by an assessee were to be valued on the basis of a reasoned approved valuer's report when the revenue produced no valid material to displace it. Rule 1D of the Wealth-tax Rules, prescribing the break-up method, was treated as directory rather than mandatory, so its application was not automatic. Fair market value had to be determined as on the date of gift, and in the absence of a lawful reference to the valuation machinery or other contrary evidence, the higher break-up valuation adopted by the Gift-tax Officer was not justified.

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Issues: Whether the valuation of the unquoted shares gifted by the assessee was to be accepted on the basis of the approved valuer's report, and whether recourse to Rule 1D of the Wealth-tax Rules was justified in the circumstances.

Analysis: The approved valuer had examined the nature of the company's business, the principles of valuation, and the relevant balance-sheet data before arriving at the share value. The revenue did not show any valid reason to reject that report, nor had it referred the valuation to the Valuation Officer under the enabling provision. The legal position applied was that Rule 1D prescribing the break-up method for unquoted shares is directory and not mandatory, and that valuation must reflect the fair market value on the date of gift. In the absence of material to displace the assessee's valuation, the higher break-up valuation adopted by the Gift-tax Officer was not justified.

Conclusion: The approved valuer's valuation was rightly accepted, and the assessee succeeded on the valuation issue.

Ratio Decidendi: For unquoted shares, the break-up method under Rule 1D is not compulsory, and where an approved valuer's report is reasoned and unchallenged by valid material, it may be accepted unless the revenue lawfully displaces it by reference to the valuation machinery provided by the statute.

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