grounds raised in this appeal are as under: ld. CWT(A)erred in deciding that WTO has properly and correctly valued unquoted shares of M/s Jagdish Industries Pvt. Ltd. and M/s Mehta (P) Ltd, Bombay on break-up method, as against on yield method basis as declared by appellant. ld CWT(A) erred in not deciding alternative ground of appeal regarding valuation of shares of M/s Jagdish Industries Pvt. Ltd., held by appellant, at Rs.. Nil. ld. CWT (A) erred in not deciding alternative ground of appeal regarding valuation of unquoted shares held by appellant that WTO is not in accordance with provision of r. 1D of WT Act, as understood by Gujarat High Court in case of CWT vs. Ashok K. Parikh reported in (1981) 129 ITR 46 (Guj). In this case assessee held certain shares in Mehta Pvt. Ltd. And Jagdish Industries Pvt. Ltd. It was claimed before WTO that since shares are unquoted yield basis should be adopted for purpose of valuation of shares of Mehta Pvt. Ltd. Again, Jagdish Industries Pvt. Ltd. was in liquidation and therefore, Nil value should be adopted on basis of break-up method. This claim was made on basis of decision in CGT vs. Smt. Kusumben D. Mahadevia etc.(1980) 14 CTR (SC) 366:(1980) 122 ITR 38 (SC) in case of Smt. Kusumben D. Mahadevia vs. N.C. Upadhya and Anr. (1980)14 CTR (Bom) 20:(1980)124 ITR 799 (Bom) in same case. WTO rejected claim regarding valuation on yield basis holding that r.1D of WT Rules is applicable and accordingly valued shares of both companies. Commissioner (A) confirmed valuation holding that WTO had followed proper and correct method. At time of hearing, ld. representative of assessee relying upon case of CWT vs. Kasturbhai Mayabhai (1986) 51 CTR (Guj) 309:(1987) 164 I T R 107 (Guj) submitted that r. 1D was directory and therefore, valuation is required to be made on yield basis. In respect of shares of Jagdish Pvt. Ltd. he was fair enough to submit that since company is in liquidation, proper method was applied. ld. Departmental Representative submitted that now issue is covered vide decision in case of WTO vs. Seth Sudhirkumar Modi(1986)24 TTJ (Del)289(SB):(1985)14 ITD 194(SB). Besides, it was held in case of CWT vs. Mamman Varghese & Ors.(1980)15 CTR (Ker) 135:(1983) 139 ITR 351(Ker) that r. 1D was mandatory. We have considered submissions and have gone through orders of authorities below. We have also considered judicial authorities cited at Bar as also these having bearing on controversy since same were also considered by judicial authorities cited. Since there was considerable debate especially in view of decision of Special Bench of Tribunal we have considered in detail various judicial pronouncements and controversy subsisting from time to time. historical background regarding r. 1D and judicial surveillance is found to as under: Taxation Laws(Amendment)Act, 1964 inserted words "subject to any rules made in this behalf" in sub-s.(1) of s.7 of WT Act and at end of sub-s.(2)(a) substituted words "may be prescribed" for words "the circumstances of case may require" w.e.f. 1st April, 1965. Rule 1D was inserted by Wealth-tax (Amendment)Rules, 1967 w.e.f. 6th Oct.,1967. On 13th Sept.,1972 decision was rendered by Supreme Court in case of CWT vs. Mahadeo Jalan & Ors. 1972 CTR (SC) 395: (1972)86 ITR 621 (SC), on valuation of unquoted shares and methods required to be adopted. It is pertinent to note that r.1D though in existence at time of hearing of appeal(or even reference with High Court decided on 12th Dec., 1967) same was not placed for consideration of Their Lordships. On reading said decision, after stating principles normally applicable, Their Lordships also made certain observations, relevant portion from headnote is reproduced below: "These are not, however, hard and fast rules. But, market value, except in exceptional cases cannot be determined on hypothesis that, because in private company one holder can bring it into liquidation, is 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; but nonetheless it is one of methods. factors which are likely to determine value of share on any particular day or at any particular time are:(i)the profit earning capacity of company on reasonable commercial basis;(ii) its capacity to maintain these profits or reasonable return for capital invested; and in special cases such as investment companies, asset backing;(iii)the prospects of capitalisation of its earning in shape of declaration of bonus shares or where company is financially and commercially sound, prospects of issue of further capital where existing shareholders have right to apply for and obtain them at certain price which is generally less than market value, offering increased yield on their investment, on assumption that company will be able to maintain same rate or at least increase aggregate payment of dividends on increased capital." Simply apply principles in light of above observations, claim raised by assessees is required to be accepted. Again, since decision was rendered by Supreme Court when r. 1D was on statute book, can it n o t be said that r. 1D can be presumed to have been considered by Their Lordships while evolving principles of valuation? In our opinion, it should be so. On 21st Feb., 1979 Their Lordships of Bombay High Court considered elaborately, in case of N.C. Upadhya & Anr. vs. Smt. Kusumben D. Mahadevia (1980) 14 CTR (Bom) 20: (1980) 124 ITR 799 (Bom) impact of principles laid down by Supreme Court in above case in context of r. 1D of WT rules and ultimately held r. 1D was directory and not mandatory. This conclusion was reached by Their Lordships while considering power granted under s. 46(2)(a) of Act and it was observed that scope of power under which rule had been made was also relevant to decide scope of r. 1D. After considering language of rule and scheme of A c t and principles of interpretation giving historical background of provisions in respect of valuation of unquoted shares it was held that r. 1D was within power given under s. 46(2)(a) of WT Act. They further held that on proper construction of s. 46(2) power given is to make enabling rule and rule itself has been construed as directory one. effect is that rule had been held to be valid one. Therefore, Their Lordships were of view that it was not possible to attribute intention to Board to rule out, in case of valuation of shares of company, all methods of computation of value of shares and restrict scope of inquiry under s. 7(1) only to value based on break-up value method. Even in case of CGT vs. Kusumben D. Mahadevia etc.(1980) 14 CTR (SC) 366:(1980) 122 ITR 38 (SC), where issue was with regard to valuation of shares of investment company it was held in general terms that earning method was only method which could properly be applied for arriving at valuation of shares on basis of decision in case of Mahadeo Jalan(supra). On 24th Sept., 1982 Their Lordships of Bombay High Court in case of Seth Hemant Bhagubhai Mafatlal vs. N. Rama Iyer, GTO & Anr.(1983)35 CTR (Bom) 179:(1983)144 ITR 737(Bom) had occasion to consider similar controversy, where for first time revenue took contention that Supreme Court had left open question as to whether or not primary method of valuation of shares was break-up method upon basis of s. 6(3) and r. 10(2) of GT Act and Rules and this contention was negatived as could be seen from relevant portion of judgment at pages 744 and 745 reproduced below: "It was contended by Mr. R.J. Joshi that Supreme Court in Kusumben D. Mahadevia (1980) 122 ITR 38 (SC) has left open question as to whether or not primary method of valuation of shares of private limited company was break-up method upon basis of s. 6(3) and r. 10(2). He submitted that first respondent had rightly intended to apply provisions of s. 6(3) and r. 10(2) and to arrive at assessment upon basis of break-up method of valuation of share of purpose of gift-tax. I cannot agree. Supreme Court has in Kusumben D. Mahadevia's case 1980) 122 ITR 38 (SC), laid down that in case of private limited company such as Mafatlal Gagalbhai Pvt. Ltd. which is going concern, which is not ripe for liquidation and regarding which there is no exceptional circumstances, break-up method cannot be applied; profit earning method is only method which can properly be applied 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). It ruled out applicability of any other method including break-up method. What Supreme Court said in regard to s. 6(3) and r. 10(2) was that it had not been argued before Tribunal that break-up method was primary method to be applied. No question based upon this argument could, therefore, be referred. It is crystal clear that valuation of shares of two companies concerned here can only be arrived at under provisions of s. 6(1) upon profit-earning method. This finding of Supreme Court is binding on first respondent. It was not open to him to seek to adopt for purpose of gift- tax assessments of petitioner any method of valuation other than that method." From above it is clear that all aspects of controversy are now judicially considered so as to make claim of assessee acceptable. On 5th Nov.,1985 their Lordships of Gujarat High Court in case of C W T vs. Kasturbhai Mayabhai (1986) 51 CTR (Guj) 309:(1987) 164 ITR 107(Guj) had occasion to deal with provisions of r. 1BB of WT Rules, 1957. On going through said judgement at page 119 and 120 we find following views expressed by their Lordships, relevant portion is extracted below: "Since it was found cumbersome and time consuming to value each and every property used for residence by employing well-recognised methods of valuation, Board stepped in and offered to value such property by set formula incorporated in r. 1BB. By introducing this formula, no vested right of assessee is sought to be taken away. It is generally assumed that value likely to be worked out by adoption of this formula would be minimum of values which would be worked out if other well-recognised formulae are employed. It was, therefore, felt that large number of assessee could adopt this formula for purpose of valuation of their asset used wholly or mainly for purpose residence and that would facilitate early disposal of cases on uniform pattern. It is indeed true that under s. 7(1) of Act, assessee can claim that his asset should be estimated on basis of price it was likely to fetch if sold in open market on valuation date. This right of assessee is not sought to be taken away by introduction of r. 1BB. If assessee feels that value of property, if sold in open market on valuation date would be less than value worked out by employing formula of r. 1BB, it would be open to him to claim that value of his asset may be so estimated. In other words, if fair market value estimated in accordance with s. 7(1) of Act works out to figure below value derived by formula of r. 1BB, assessee would have to be taxed on basis of that lower value. Rule 1BB, therefore, does not introduce formula which is likely to adversely affect interests of assessee. It is necessary to read formula accordingly because it is well settled that rule framed by rule-making authority under statute must not transgress or travel beyond scope of main provision of statute, but must confine itself to scope of power conferred by statute which it must be assumed cannot be in excess of main provision in statute." ratio laid down in above observations should be considered as binding upon us and therefore, we have no hesitation in holding that valuation of shares is required to be made on basis of principles settled in case of Mahadeo Jalan (supra) i.e. profit earning capacity on reasonable commercial basis in cases where companies are not ripe for liquidation or profits do so reflect exceptional circumstances and break-up method in case of company which is ripe for liquidation and where exceptional circumstances exist. We now turn to decisions relied upon by Revenue. On going through decision of Special Bench in case of Seth Sudhir Kumar through decision of Special Bench in case of Seth Sudhir Kumar Modi(supra), we find that members have followed judgments pronounced by Allahabad High Court on basis that decisions rendered by Allahabad High Court were binding upon members, probably because appeal being heard by Delhi Special Bench was coming within jurisdiction of Allahabad High Court. This apart, we find from headnote in para 2 mention that case of Mahadeo Jalan (supra) was decided when rules were in existence and therefore, there is no observation of Supreme Court on applicability of valuation on yield basis as against valuation on break-up method as adopted in rules. assessment year under consideration was 1975-76 when rules were not in operation, it is stated, With respect, we should clarify here as done in aforesaid paragraph that rules did exist in statute book right from Oct., 1967 and decision was rendered by Supreme Court only in 1972. Besides, similar controversy was also decided by Supreme Court on 5th Dec., 1979 in case of CGT, Bombay vs. Smt. Kusumben D. Mahadevia (supra) when relevant rules under GT Act as well as WT Act were in existence and controversy under both Acts was decided by Supreme Court on basis of principles of Mahadeo Jalan (supra). case of Kerala High Court in case of Mamman Varghese (supra) was decided on basis of decision rendered by Allahabad High Court in CWT(A) vs. Sripat Singhania 1977 CTR (All) 119: (1978) 112 ITR 363(All). In said decision of Allahabad High Court, decision rendered by Supreme Court in case of Mahadeo Jalan(supra)was not considered. Similarly, Allahabad High Court rendered another decision in Bharat Hari Singhania vs. CWT(A) (1979)9 CTR (All) 164:(1979)119 ITR 258(All), where again they did not consider impact of Supreme Court decision and merely followed earlier decision. In view of above discussion, we hold that valuation of shares of Mehta Pvt. Ltd. is required to be made on yield basis on basis of principles laid down in case of Mahadeo Jalan(supra), and similarly valuation of shares of M/s Jagdish Industries Pvt. Ltd. is required to be adopted on basis of break-up method. In view of our this decision other alternative grounds do not survive. We, therefore, set aside orders passed by Commissioner(A)and direct WTO to revalue shares as per our decisions. In result, appeal is allowed in part. *** MAHENDRA N. MEHTA v. WEALTH-TAX OFFICER