1987 (3) TMI 143

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.... The dispute involved is valuation of shares of private company held by the deceased on the date of his death. 2. The deceased is Bomanji Jamasji Mistry, who died on 15-1-1976. On the date of his death he held shares in B. Jamasji Mistry Pvt. Ltd. The accountable person made valuation in accordance with the provisions of Rule 1D of Wealth-tax Rules, 1957 at Rs. 222 per share. In the course of assessment, he submitted computation made on yield basis under which value came to Rs. 48.34 per share. The Assistant Controller of Estate Duty made valuation by adopting general break-up method. In that process, he did not accept the value shown in the balance sheet of the company as value of the assets. He took higher value in the computation. Besid....

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.... the terms of the purchaser being entitled to be registered as holder subject to articles of association, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market would be disregarded. This statutory provision cannot be ignored. In view of this specific special provision for valuation of shares of private company, those shares are bound to be valued with reference to the value of the total assets of the company. This is the primary method prescribed by the statute. It is only when the value is not ascertainable by recourse to that method, that the question of adopting some other method would arise. Now, valuation with reference to the value of the total assets of the company i....

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....person that yield method should be accepted. It is true that the Supreme Court has laid down in two cases that yield method is the proper method for valuation of shares of a Private Company when the company is a going concern and not ripe for liquidation and when the fluctuations in the profits are not such as to prevent reasonable estimation of profit-earning capacity. These two decisions are CWT v. Mahadeo Jalan [1972] 86 ITR 621 and CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 which were cited before us by the learned representative of the assessee. The first decision was under the Wealth-tax Act and the other under the Gift-tax Act. In the second decision, the Supreme Court made it clear that they had not considered effect of Rul....