Fair market value must reflect the valuation date; stale share quotations yield to nearby actual sales and rule-based valuation.

Fair market value under section 7(1) had to be determined as on the valuation dates, so a stale stock exchange quotation was not a reliable basis where it was remote in time and did not reflect market conditions on those dates. Actual sale transactions close to the valuation dates, whose genuineness was not discredited, provided a better indicator of value. A quotation is useful only if proximate to the relevant date. On these facts, the shares could be valued on the basis of the actual transactions or under rule 1-D, and they were capable of being treated as unquoted shares because they were not regularly quoted in a meaningful sense.

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Issues: Whether the value of the company shares had to be determined on the basis of an old stock exchange quotation or on the basis of actual sales near the valuation date, and whether the shares could be treated as unquoted shares for rule-based valuation.

Analysis: Section 7(1) required determination of the fair market value as on the valuation dates. The available quotation was remote in time and did not reflect the market on those dates, whereas the actual sale transactions were close to the valuation dates and their genuineness was not discredited. A stock exchange quotation can be a reliable indicator only when it is proximate to the valuation date. On the facts, the shares could not be valued by relying on the stale quotation alone, and the valuation based on the actual transactions or under rule 1-D was appropriate. The shares were also capable of being treated as unquoted shares because their value was not regularly quoted in a meaningful sense for the relevant dates.

Conclusion: The assessee's valuation was rightly accepted and the departmental appeals failed.

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