Gift Tax-Method of valuation-Rule 10(2). - Income Tax - 1438/CBDT

INSTRUCTION NO. 1438/CBDT Dated: December 10, 1981 Your attention is invited to the Board's Circular No.7-D of 1963 dated the 4th December 1963 (issued from F. No 1/35/63/ED) wherein the board had laid down the position regarding allowability of discount for no marketability of unquoted equity shares while valuing them for the purpose of Estate Duty assessements. It had been laid down in the said circular that- i) Where the value of a share is determined by the break-up method no discount for restrictions regarding alienation should be given. ii) In the case of investment and holding companies the break-up method of valuation is found unsuitable for estate duty as well as other direct taxes as stated in Board's circular No.1-D/GT/63 (F.NO.12/32/GT/63). In such cases where an alternative method of valuation is adopted there may be instances where a discount for restrictions in alienability may have to be given. Whether a discount should be allowed, and if so what the quantum therof should be has to be determined on the facts of each case. The Baord have, however decided that for Estate Duty purposes such discount may vary between 10 to 15 % of the value determined otherwise. If in the special circumstances of a case a higher discount is considered reasonable a reference should be made to the Board. 2. Since the provisions of sec.37 of the Estate Duty Act, are identical with those of rule 10(2) of the Gift Tax rules the position laid down above will be applicable mutatis mutandis to valuation for the purposes of gift-tax assessment. 3. The above may please be brought to the notice of all the officers working in your charge.