This appeal is by Revenue and relates to asst. yr. 1976-77. On 1st Jan., 1976 assessee made gift of 230 shares of M/s Amrutanjan Ltd., Madras. value shown per share was Rs. 257. This was sale price at which shares of this company were sold in 1974. GTO, holding that gift took place very much after sale, took view that sale price on 1974 could not be taken as market price and he valued shares by break-up method and arrived at Rs. 372 per share. assessee also gifted 137 shares per share. assessee also gifted 137 shares of Nageswara Rao Eastes (P) Ltd. assessee sought to deduct from value arrived at by break-up method 25% of break-up value on ground that such deduction was warranted under s. 1-D of WT Rules. GTO took view that WT Rules were applicable for specific purpose of valuation under that Act and similar discount could not be given in respect of valuations made under GT Act. He, therefore, did not allow any discount for value of shares of Nageswara Rao Estates (P) Ltd. and took valuation of Rs. 447 per share. assessee appealed. AAC referred to decision of Mysore High Court in case of CED vs. J. Krishnamurthy (1974) 96 ITR 87 (Mys) and also two decisions of Tribunal and held that value arrived at by method prescribed under r. 1-D of WT Rules could be equally applied for valuation under GT Act. He, therefore, directed that value of shares gifted be worked out in accordance with r. 1-D of Rules. revenue is aggrieved, it is contended for Revenue that for gift-tax purposes r. 1-D of WT Rules had no application. assessee, on other hand, pleaded for order of AAC being upheld. We have considered rival submissions. We would proceed to decide this appeal with reference to factual position. Nageswara Estates is private limited company. It was ascertained that memorandum and articles of association contained restrictive clause in relation to alienation of shares. shares had to be offered to existing shareholders at fair market value determined by company in first instance. Rule 10(2) of GT Rules reads as under: "Where articles of association of private company contain restrictive provision as to alienation of shares, value of shares, if not ascertainable by reference to value of total assets of company, shall be estimated to be what they would fetch if on date of gift they could be sold in open market on terms of purchaser being entitled to be registered as holder subject to articles, but fact that special buyer would for his own special reasons give higher price than price in open market shall be disregarded." Therefore, valuation of shares of Nageswara Rao Estates ( P) Ltd., would have to be considered in light of aforesaid rule. Mathematically it is possible to always ascertain value of any share in with reference to value of total assets. cases in which value of is not as certain able by reference to value total assets of company would be those cases where commercially realistic market value would not result if mere arithmetical basis is adopted. Where there are restrictive provisions in matter of transfer, which would affect very transferability, it is now settled law that market value of shares will have to be depreciated to certain extent for this feature (see decision of Madras High Court in case of R. Rathinasabapathy Chettiar vs. CWT (1974) 93 ITR 555 (Mad)). break-up value method is one of methods is one of methods for arriving at value of shares but in view of restrictive provision actual market value would not be value arrived at by break-up value method but such value discounted appropriately, as has been observed by Madras High Court in decision reported in (1974) 93 ITR 555 at 562 & 563 (Mad) which is as under: "The learned counsel for assessee would then contend that even accepting break-up method of valuation as proper one, WTO has to find out depreciated value of shares in view of various restrictions contained in articles of association which buyer should be taken to be aware of. We are of view that this contention is correct. break-up method of valuation is adopted to find out real worth of shares. But s. 7(1) of Act enjoins WTO to find out price shares would fetch if sold in open market on valuation date. If shares are sold in open market, purchaser will certainly take note of various restrictions contained in purchaser will certainly take note of various restrictions contained in articles of association of company and offer only lesser price. It is for this reason Abraham vs. Federal Commissioner of Taxation (70 C.L.R. 23) suggested adoption of depreciated value wherever there are restrictions on transfer of shares as also on price. Therefore, value ascertained on basis of break-up method has to be depreciated to some extent having regard to restrictions contained in articles of association, which have tendency to bring down price in open market sale." Having examined case from aforesaid angle, we are of view that discount of 25 per cent is not excessive especially when no dividends had been declared in immediate past by company. Therefore, we hold that value computed by break-up value would be discounted by 25 per cent in respect of shares of Nageswara Rao Estates (P) Ltd. Coming to shares of M/s Amrutanjan Ltd., company is not private company and, therefore, provisions of r. 10(2) of GT Rules do not apply. There are no other specific rules in GT Act which could be said to be attracted as far as valuation of shares of this company is concerned. It is well known that if there is free market sale, then that would serve as comparable price for determining market value. In present case, there was such sale at Rs. 257 per share. There is absolutely no material to suggest that sale was not free market sale. only point made out by GTO was that sale took place in 1974 whereas gift took place two years later in 1976. No specific material is brought on record to show that value of assets or net worth of company had gone up significantly in period between 1974 and 1976. value per share by break-up method came to Rs. 372. Rule 1-D of WT Rules provided for standard discount of 15 per cent from value arrived at by break-up method only to make due allowance for general factors of variations. In present case, when value according to actual in 1974 was only Rs. 257, we consider that no case had been made out in absence of any other sales, etc. for Revenue to contend that no discount at all should be given from break-up value of Rs. 372 per shares. No special features were brought to our notice such as no declaration of dividends was made in past. As matter of fact, though on one hand assessee had contended that sale price alone should be taken as market value, it was specifically stated in grounds of appeal before AAC that at least discount of 15 per cent should be given. Having regard to facts stated, we consider that value of Rs. 372 per share can be discounted by 15 per cent. This would give in round figures value of Rs. 317 per share. We direct that this value be taken. In view that we have taken on merits it is not necessary for us to express any final opinion on abstract proposition as to whether under r. 1D of WT Rules value could be computed and taken unvariably as value of gift-tax purposes. result is appeal is treated as dismissed for statistical purposes subject to actual working being done by WTO on line indicated by us. *** SECOND GIFT-TAX OFFICER v. S. NAGESWARA RAO