R. RANGAYYA, A.M.: As common points are involved in both appeals, they are disposed of by common consolidated order for sake of convenience. assessee in these cases have gifted during accounting year relevant to asst.yt. 1980- 8 1 certain number of shares of M/s Ambadi Enterprises Pvt. Ltd. I.T.I. & M. Sales Ltd. and Tube Investments to different persons. These shares were not quoted in stock exchange. For purpose of estimating their fair market value as on date of gift, GTO valued them on yield basis. Aggrieved by above orders of GTO, assessee filed appeals before CIT(A) who held that only in cases where no dividend is declared or where there was no other method possible, yield method is taken in preference to other methods. In absence of any reason to show, why break-up value does not represent real worth of shares, he directed GTO to recompute value of gifted shares on basis of break-up value method. Revenue is now in appeal before us contending that CIT(A) was not correct in holding that shares in question should be valued only on break- up value method and not on yield basis. Shri B.C. Mohanty, ld. departmental representative contends that decision of Supreme Court in case of Kusumben D. Mahadevia (1980) 122 ITR 38 (SC) clearly applies to facts of case, as company, shares of which were gifted was going concern. Accordingly, it was contended that GTO was correct in valuing gift on yield basis. He also brings to our attention decision of Bombay High Court in case of Seth Bhagubhai Mafatlal vs. GTO (1983) 35 CTR (Bom) 179: (1983) 144 ITR 737 (Bom) in which it was held that in valuing shares for purpose of gift-tax, in case of private limited company which is going concern and not ripe for liquidation and regarding which there are no exceptional circumstances, break-up method cannot be applied, profit earning method is only which can be applied for valuation of shares. He also relies on decision of CGT vs. Kusumben D. Mahadevia (1980) 14 CTR (Bom) 20: (1980) 124 ITR 799 (Bom) in which it was held that r. 1D of WT Rules is only directory and not mandatory and appropriate method of valuation of shares of private limited company which is not quoted in stock- exchange is not break-up method but yield method. ld. counsel, Shri K. Srinivasan, on other hand, vehemently contends that under provisions of GT Act, valuation of assets has to be made under s. 6 As per s. 6(1) value of any property shall be estimated to be price which in opinion of GTO it would fetch if sold in open market on date on which gift was made. This is subject to provisions of sub-s (3) of same section wherein it is enacted that where value of property cannot be estimated under sub-s. (1) because it is not saleable in open market value shall be determined in prescribed manner. It is claimed that r. 10(2) of GT Rules lays down that where articles of association of private company contain restrictive provisions 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 gift they could be sold in open market on term of purchaser being entitled to be registered as holder subject to articles. On basis of above provisions, it is contended that break-up method of valuation should be adopted in case of private limited company and it is only in cases such method is not available, recourse can be had to other methods of valuation. Shri Srinivasan also relies on decision of Madras High Court in case of CWT vs. S. Ramu & Ors. (1984) 147 ITR 278), CGT vs. K. Ramesh (1983) 142 ITR 462 (Mad) and decision of Kerala High Court in case of CIT vs. Mamman Mathew (1985) TLR 1177. Shri Srinivasan also contends that even on yield basis GTO has not correctly computed value of shares in respect of M/s Ambadi Enterprises Private Limited as there is arithmetical mistake. According to him value per share should be Rs. 13.30 and not Rs. 133.30 as calculated by GTO. Having heard rival submissions, we are of opinion that CIT(A) was not correct in directing GTO to recompute value of shares on break-up value method. Supreme Court in case of CWT vs. Mahadeo Jalan & Ors. (1972) 86 ITR 621 (SC) held that market value except in exceptional cases, cannot be determined on hypothesis, because in private company one holder can bring it into liquidation, it should be valued as on liquidation by break-up method. yield method is generally applicable method while break-up method is one resorted to in exceptional circumstances or where company is ripe for liquidation. Again in case of CGT vs. Kusumben D. Mahadevia, (surpa) Supreme Court held that in case of company which is going concern and whose shares are not quoted on stock exchange, profits which company has been making or should be capable of making or, in other words, profit earning capacity of company would ordinarily determine value of its shares. break up value would not be appropriate for valuation of shares of such company because among factors which govern consideration of buyer and seller, where one desires to purchase and other wishes to sell, factor of break-up values as on liquidation hardly enters into consideration where shares are of going concern. It is only where company is ripe for winding up or situation is such that fluctuations of profits and uncertainty of conditions at date of valuation prevent any reasonable estimation of profit earning capacity of company, that valuation by break-up method would be justified. It is not case of assessee that company's shares of which are gifted, are ripe for winding up. There are fluctuations in profits to uncertainty of conditions at date of valuation preventing any reasonable estimation of profit earning capacity of company. In circumstances,in our opinion, only method for valuation of shares will be yield method. However, Shri Srinivasan contends that Supreme Court in latter case did not decide question whether valuation of shares should have been made on basis break-up method by reason of r. 10 of GT Rules. As above mentioned rule prescribes that break-up value method should be followed in preference to other methods, he points out that GTO ought to have valued shares on break-up method only. This point is clearly answered by Bombay High Court in case of Seth Hemant Bhagubhai Mafatlal (1983) 35 CTR (Bom) 179-(1983) 144 ITR 737 (Bom) in which similar argument was advanced before Bombay High Court wherein it was held that for valuing shares for gift-tax purposes in case of private limited company, which is going concern which is not ripe for liquidation, and regarding which there are no exceptional circumstances, break-up method cannot be applied, profit earning method is only method which can be adopted for valuation of its shares. Supreme Court affirmed that valuation of shares of company such as this can be validly done under provisions of s. 6 (1) of GT Act. It ruled out applicability of other method including break-up method. decisions sought to be relied upon by ld. counsel for assessee, in our, opinion do not advance his case any further. In case of CIT vs. Mamman Mathew (1985 TLR 1177), Court held that GT authorities have no authority to value shares without following any principle or procedure. In absence of any rules. It held that r. 1D of WT Rules may be followed. Similarly in case of CWT vs. S. Ram & Ors. (1984) 147 ITR 278 (Mad) issue before Court was whether gratuity and other contingent liability will have to be allowed as deduction from value of companies assets in valuing unquoted shares of company on break up value method. No question was either argued or decided by High Court in that case, as to whether shares of company, which is going concern and which is not ripe for liquidation are to be valued on yield basis or on break-up value method. other decision in CGT vs. K. Ramesh (1983) 141 ITR 462 (Mad) also does not deal with issue presently under consideration. In view of above discussion and in view of decisions of Supreme Court and Bombay High Court, we are of opinion that unquoted shares of above companies M/s Ambadi Enterprises Pvt. Ltd. & T.I. & M Sales Ltd. have to be valued only on yield method and not on break-up value method as these two companies are going concerns, which are not ripe for liquidation and there are no exceptional circumstances by reason of which resort should be had to break-up method. In view of above, orders of CIT(A) are reversed and GTO's ordrs are restored. However, GTO is directed to verify correctness of assessee's claim regarding wrong calculation of valuation of shares of M/s Ambadi Enterprises Pvt. Ltd. fact value of these shares is said to be only Rs. 10 and not Rs. 100 as estimated by GTO. Subject to above, appeals are treated as allowed. *** GIFT-TAX OFFICER v. M.A. MURUGAPPAN