Open-market valuation of unquoted shares for estate duty permits break-up method, without adding goodwill or expected dividend.

For estate duty valuation, unquoted shares are to be assessed at their open-market value using recognised valuation methods where no special statutory rule applies. The break-up method is a recognised approach, and wealth-tax valuation based on that method may be used as relevant evidence. On that basis, goodwill was not to be separately added because the break-up approach did not contemplate it, and expected dividend was also not includible absent material showing it was properly part of the asset value. The Tribunal's reliance on the wealth-tax valuation was upheld, as there was no material indicating any increase in value after the balance-sheet date.

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Issues: Whether, for estate duty purposes, the value of unquoted shares held by the deceased could be determined by adopting the break-up value shown by the wealth-tax valuation, and whether the goodwill of the company and expected dividend for the relevant year could be added while valuing the shares.

Analysis: Under section 36 of the Estate Duty Act, 1953, the principal value of property is the price it would fetch in the open market at the time of death. For unquoted shares, where no specific estate duty rule prescribes the method of valuation, the market value has to be ascertained by recognised methods of valuation. The break-up method is a recognised method, and rule 1D of the Wealth-tax Rules, 1957, though not directly applicable to estate duty, may be looked at to understand that method. On that basis, goodwill is not to be separately added if the statutory break-up approach does not contemplate it. The suggested addition for expected dividend was also not sustainable because dividend does not accrue from day to day and no material showed that such amount was properly includible in the asset valuation. The Tribunal was also entitled to rely on the wealth-tax valuation as important evidence, there being no material showing an increase in value after the published balance-sheet date.

Conclusion: The Tribunal was justified in valuing the shares at Rs. 1,69,020 and in refusing to add goodwill or expected dividend. The issue is answered in favour of the assessee and against the department.

Final Conclusion: The reference was answered against the revenue, and the valuation adopted by the Tribunal was upheld as the correct open-market value for estate duty purposes.

Ratio Decidendi: In the absence of an estate duty rule prescribing a special method, unquoted shares must be valued for estate duty by recognised principles of open-market valuation, and a statutorily recognised break-up method may be adopted without importing extraneous additions not contemplated by that method.

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