Valuation of unquoted shares must follow Rule 1D, not a contrary market-value method, under wealth-tax law.

Rule 1D of the Wealth-tax Rules, 1957 governed the valuation of unquoted shares and could not be disregarded in favour of market value or another valuation method. Applying its earlier ruling, the Supreme Court held that the rule was not merely directory in the sense accepted by the High Court, so the valuation had to be made in accordance with that rule. The assessee's proposed method, the Tribunal's departure from rule 1D, and reliance on market value after 1967 were therefore unsustainable. The valuation questions were answered for the Revenue, and the appeal succeeded.

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Issues: Whether rule 1D of the Wealth-tax Rules, 1957 governed the valuation of unquoted shares and whether the Tribunal could disregard that rule while adopting market value or an alternative method of valuation.

Analysis: The reference arose under section 27 of the Wealth-tax Act, 1957. The Court applied its earlier decision holding that rule 1D was not directory in the manner accepted by the High Court, and that the valuation of unquoted shares had to proceed in accordance with that rule. On that basis, the questions relating to approval of the assessee's method, disregard of rule 1D, and adoption of market value after 1967 could not be sustained.

Conclusion: The valuation questions were answered in favour of the Revenue and against the assessee.

Final Conclusion: The appeal succeeded, the order under appeal was set aside, and the Revenue's position was accepted on the governing valuation issue.

Ratio Decidendi: Where a valuation rule governs the computation of unquoted shares under the Wealth-tax regime, it must be applied according to law and cannot be bypassed in favour of a contrary market-value approach.

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