K.C. SRIVASTAVA, A.M. These are cross-appeals, one by assessee and one by Department against order of CGT(A) for asst. yr. 1979-80. Though gift-tax assessment was made in hands of Dr. Surender Singh Majithia, he later on expired and his legal heirs have been brought on record. In fact appeal has been filed before us by legal heir and executors of estate. main issue in present appeals relates to valuation of certain shares of M/s Saraya Sugar Mills, which had been gifted by assessee on 21st May, 1978. assessee had disclosed value of 70,000 shares at Rs. 2,62,500 but at time of assessment it had been contended by representative of assessee that while valuing these shares liability in respect of provision for gratuity should be deducted. It was also contended that as shares are not readily saleable in market deduction of 30 per cent should be allowed. GTO however, determined value under r. 1D of WT Rules and took value at 75 per cent of that value as no dividends had been declared by company. He did not accept plea of assessee regarding deduction for actuarial valuation of provision for gratuity. When matter came before CGT(A), two main contentions were considered by him. first was that while valuing shares, it should be yield method, which should be applied and not break-up method as provided under r. 1D of WT Rules. second point raised before him was about deduction of actuarial value of liability for gratuity. Life Insurance Corporation had certified that value of this gratuity was Rs. 47,98,807. Reliance was placed on decision of Supreme Court in case of CGT vs. Smt. Kusumben D. Mahadevia (1980) 14 CTR (SC) 366: (1980) 122 ITR 38 (SC) and also decision in case of CWT vs. Mahadeo Jalan 1972 CTR (SC) 395: (1972) 86 ITR 621 (SC). Strong reliance was placed on decision of Madras High Court in case of CWT vs. S. Ram (1983) 37 CTR (Mad) 158: (1984) 147 ITR 278 (Mad) wherein it was held that gratuity should be allowed as deduction while valuing shares. CGT(A) accepted plea of assessee and he proceeded to work out value on basis of average profit of earlier three years. He also held that actuarial value of gratuity liability was also to be deducted for purpose of valuing shares. On this basis he determined value of shares at Rs. 5.96 per share as against value of Rs. 15.42 per share taken by GTO. Now both parties are in appeal. case of Department is that while valuing shares CGT was not justified in not applying yield method and not r. 1D of WT Rules. counsel for assessee, on other hand, submitted that CGT(A) did not consider plea of assessee that in case of gift-tax value of shares could be determined on basis of preceding and succeeding balance-sheets and not merely one of them. It was also submitted by him that CGT (A) did not take into consideration fact that position of sugar industry was precarious at relevant time when gift was made. He contended that without considering financial results of relevant year Commissioner has arrived at unreal value. It was pointed out by him that in balance sheet of company ending on 30th Sept., 1978 there was huge loss of Rs. 44,86,357. It was further contended that even if losses are divided on time basis proportionate loss would come to Rs. 29,34,357, which was enough to wipe out profits of earlier two years. He contended that decision of Madras High Court in case of S. Ram (supra) should have been taken into consideration by CGT(A). It was also pointed out that as on 30th September value of shares had considerably gone down and this reflected in assessment of assessee for subsequent year where value was taken at NIL. reference was also m d e to balance sheet of company in support of assessee's contention. We have carefully considered rival submissions. In view of decision of Supreme Court in case of Smt. Kusumben D. Mahadevia (supra) and t h e further decision of Bombay High Court in case of Seth Hemant Bhagubhai Mafatlal vs. N. Ramu Iyer, GTO (1983) 35 CTR (Bom) 179: (1983) 144 ITR 737 (Bom) it has to be held that break-up method of valuation as prescribed in r. 1D could not be applied for purpose of gift-tax unless it was case of company which was ready for being wound up. Supreme Court case of company which was ready for being wound up. Supreme Court had further held that even average of two methods was not correct method unless it was not possible to follow yield method due to k reason. It had also been indicated that where dividends are not current indicator of value, profits should be taken into consideration. In case of S. Ram (supra), Madras High Court has held that for purpose of valuing shares under wealth-tax, gift-tax and estate duty provisions for gratuity based on actuarial valuation should be held as deduction. Madras High Court has referred to decision of Supreme Court in case of Vazir Sultan Tobacco Co. Ltd. vs. CIT (1981) 25 CTR (SC) 186: (1981) 132 ITR 559 (SC) while deciding above point. One other question decided by Madras High Court in above case was choice of balance sheet which has got to be taken as basis for purpose of computation of company's net wealth for valuing unquoted shares. Court held that where gift takes place in between dates of two balance sheets, both balance sheets may be taken into consideration while determining value of unquoted shares. For this their Lordships referred to their decision in case of CGT vs. K. Ramesh (1983) 141 ITR 462 (Mad). In that case balance sheet of two or three days after date of gift was taken into consideration for determining value. Their Lordships said that case of K. Ramesh (supra) was on its own facts. It was further stated that in absence of facility of drawing up balance-sheet precisely on date of gift, it was proper to evaluate shares having regard to position in balance sheet preceding and succeeding date of gift. Their Lordships did not approve of view of Tribunal that only preceding balance sheet should be taken into consideration. In spite of fact that this decision has been referred to before Commissioner, he did not discuss this aspect of matter. Our attention was drawn to balance sheet and profit and loss account o f company whose shares have to be valued as on date of gift. In year ending 31st Oct., 1978 position of sugar mills was not very happy. It appears from Director's report that sugar industry had passed through one of its worst crises as result of directions of Government to make higher payments for sugarcane. It is also stated that sugar mills were made to crush all available cane in uneconomical recovery resulting in huge built up stocks and production far outstripped consumption. On 16th April., 1978 sugar was decontrolled after holding back release of free-sale sugar. companies had to sell stock of sugar to meet their liability for sugarcane. This resulted in crash in sugarcane prices. However, it is noted by Directors that on account of direction carried out prior to start of crushing season in spite of cane inferior to previous year company had normal working season upto 7th April and they had highest recovery, highest recovery, highest daily crushed and higher percentage of better cane sugar as compared to previous five years. It was after this that working deteriorated in extended period of crushing. Having regard to circumstances as discussed above, we are of view that CGT(A) erred in not taking into consideration position of company on date of gift. exact position is not before but it does appear that some time after middle of April company was facing unfavourable circumstances resulting in crash in prices and meeting of excessive liabilities. It is not known whether loss suffered by company at end of its accounting period was substantially effective on date of gift. It cannot, however be denied that on date of gift fact that sugar industry was facing difficult situation was known to all persons concerned with that industry, and intending buyers could also know situation and therefore, it would not be correct to completely ignore financial condition as on date of gift. As learned CGT(A) has not taken this factor into consideration and has determined value independent of financial year as on date of gift, we deem it fit to restore matter to CGT(A) for ascertaining all relevant facts for purpose of determining value of shares as on that date. While doing so, we uphold approach of Commissioner in applying yield method as well as allowance of actuarial value of liability for gratuity. At same time, one has to keep in view fact that there was substantial reserve in balance sheet, which has ultimately been adjusted by company towards loss suffered in this year. CGT(A) is directed to take into consideration as far as possible position of company on relevant date of gift and then to ascertain possible value of shares on that date. We have not accepted plea of learned counsel for assessee to take figure of loss on relevant date of gift on time basis. In view of fact that as per Directors report position of company was normal till April, 1978 and it deteriorated rather sharply after that. As gift had taken place in third week of May, 1978, position as on that date has to be ascertained and trend of market has also to be taken into consideration. If it is possible to have market value of other sugar companies on near about dates, it will give indication about t h e extent of fall which was suffered by sugar companies. With these directions, appeal is restored to file of CGT(A). In result, departmental appeal is dismissed and appeal by assessee is allowed for statistical purposes. *** DR. SIR SURENDER SINGH MAJITHA v. GIFT TAX OFFICER