D. K. SEN, C. K. BANERJEE, JJ. ( 1 ) THE facts found and/or admitted in this Reference at the instance of the Commissioner of Wealth Tax, West Bengal III, are shortly as follows. Messers. Bejoy Kumar Karnani and Others, the assessee, a Hindu Undivided family, was assessed to wealth tax for the assessment years 1957-58 to 1961-62, the relevant valuation dates being 31st March of each of the years from 1957 to 1961. ( 2 ) AT the relevant period the assessee held a number of shares in Karnani Properties Ltd. and Karnani Investment Pvt. Ltd. The Wealth Tax Officer following an order of the Tribunal in the Wealth Tax assessment to Bejoy Kumar Karnani (individual) estimated the value of these shares by the method known as "break up value" method. The shares of Karnani Properties Ltd. were accordingly valued at Rs. 6/- per share for the assessment years 1957-58 and 1958-59 and at Rs. 6. 23, Rs. 6. 18 and Rs. 6. 18 respectively for the other assessment years i. e. 1959-60, 1960-61 and 1961-62. ( 3 ) THE shares of Karnani Investment Pvt. Ltd. had to be valued for the assessment years 1959-60, 1960-61 and 1961-62. Again following the "break up value" method, the Wealth-tax Officer estimated the value of these shares at Rs. 12/- per share for the assessment years 1959-60 and 1960-61 and at Rs. 10. 83 for the assessment years 1961-62. ( 4 ) IN appeals preferred by the assessee, objecting to the valuation estimated as aforesaid, the Appellate Assistant Commissioner upheld the valuation as made by the Wealth Tax Officer. ( 5 ) THE assessee went up to the Income Tax Appellate Tribunal on further appeals. Following, inter alia, an earlier order in the case of Balbhadradass Bangur in Wealth Tax Appeals Nos. 1199 to 1202 and nos. 1231 to 1234 all of 1964-65, the Tribunal accepted the principle that unquoted shares of an investment company, should be valued primarily on the basis of its dividend earning capacity. ( 6 ) IN estimating the value of the shares of Karnani Properties Ltd. the Tribunal first considered the value of the quoted shares of other property holding companies and I particular those of Hindusthan Building Society Ltd. and Messrs. Sahu Properties Ltd. for the purposes of comparison. ( 6 ) IN estimating the value of the shares of Karnani Properties Ltd. the Tribunal first considered the value of the quoted shares of other property holding companies and I particular those of Hindusthan Building Society Ltd. and Messrs. Sahu Properties Ltd. for the purposes of comparison. It was found that by reason of the rate of dividend declared, the quoted market value of the shares in the said companies were at all material times lower than their break up value. In two years when no dividend was declared, the shares of the Hindusthan Building Society Ltd. were quoted at 50% and 40% of their par value. ( 7 ) THE Tribunal next considered the profit yielding capacity of Karnani Properties Ltd. Ignoring the commission and allowances paid to the Managing Director the Tribunal computed the average net profits after payment of taxes to be Rs. 92,000/- Rs. 72,000/-, Rs. 50,000/-, Rs. 43,000/- and Rs. 8,000/- respectively for the assessment years 1957-58 to 1961-62. Accordingly, the net earning from the shares of this company was held to be about 3%. The Tribunal took into account that the rental income of the said company was affected by reasons of the existence of a number of old tenants in the properties. The Tribunal also took into account that the value of the land belonging to the company had appreciated though was not reflected in its balance sheet. The Tribunal held that the shares of this company was more valuable than an ordinary share, yielding return of only 3%, and accordingly, valued the same at 50% of par value i. e. Rs. 2. 50 per share. ( 8 ) IN valuing the share of Karnani Investment Pvt. Ltd. , which was incorporated in 1958, the Tribunal noted, that in the year ending the 31st March 1959, after providing for Director's remuneration of Rs. 11,250/- and writing off preliminary expenses of Rs. 1797/- there was a net book loss of Rs. 2043/ -. By adding back the said amounts of remuneration and expenses, the Tribunal computed the real profits of the company to be Rs. 11,000/ -. A comparable figure was estimated for the year ended 31st March 1960 and for the year ended 31st March 1961, real profit was estimated on a similar basis at slightly over Rs. 10,000/ -. 2043/ -. By adding back the said amounts of remuneration and expenses, the Tribunal computed the real profits of the company to be Rs. 11,000/ -. A comparable figure was estimated for the year ended 31st March 1960 and for the year ended 31st March 1961, real profit was estimated on a similar basis at slightly over Rs. 10,000/ -. The Tribunal held that though profits were low by taking into account the future prospects of this newly floated company, the value of its shares should be estimated at 50% of the per value i. e. Rs. 5/- per share. ( 9 ) AT the instance of the Commissioner of Wealth Tax, West Bengal III, Calcutta the following question had been referred under section 27 (1) of the Wealth Tax Act, 1957 as a question of law arising from the order of the Tribunal. "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of section 7 (1) of the Wealth Tax Act, 1957, the value of unquoted shares of (1) Karnani Properties Ltd. and (2) Karnani Investments Private Ltd. as on the relevant valuation dates, should be determined on the basis of the average earning capacity of the shares?" ( 10 ) AT the hearing, Mr. B. L. Pal, learned counsel for the Revenue, has drawn our attention to a decision of the Supreme Court in (1) Commissioner of Wealth Tax Assam v. Mahadeo Jalan and Ors, reported in 86 ITR 621 for the following observations in the judgment. B. L. Pal, learned counsel for the Revenue, has drawn our attention to a decision of the Supreme Court in (1) Commissioner of Wealth Tax Assam v. Mahadeo Jalan and Ors, reported in 86 ITR 621 for the following observations in the judgment. P. 628 -"leaving aside any distress sales, the factors which in our view are likely to determine the fixation of a share on any particular day or at any particular time is, firstly, the profit earning capacity of the company on a reasonable commercial basis; secondly, its capacity to maintain those profits or a reasonable return for the capital invested and in special cases such as investment companies, the asset-backings, the prospects of capitalization of its earning in the shape of declaration of bonus shares or where the company is financially and commercially sound, the prospects of issue of further capital where the existing share-holders have a right to apply for and obtain them at a certain price which is generally less than the market value, offering an increased yield on his investment, on the assumption that the company will be able to maintain the same rate or at least increase the aggregate payment of dividend on the increased capital. "p, 634. "the yield method is the generally applicable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation but none the less is one of the methods. " ( 11 ) MR. Pal also drew our attention to a chart printed in the paper book at p. 84-85. From the figures entered in this chart. Mr. Pal contended that Karnani Properties Ltd. had no yielding capacity whatsoever from the years 1958-59 to 1961-62. ( 12 ) ON the basis of the above Mr. Pal submitted that the shares in the instant case, belong to investment companies, one of which had no yield whatsoever at the relevant time therefore, fell within the category of special cases, an/or came within the exceptional circumstances and the break up method had to be adopted for their valuation. ( 13 ) MR. R. N. Bajoria, learned counsel for the assessee, has contended on the other hand, that the judgment of the Supreme Court, in Mahadeo Jalan's case (supra) if read in its entirely supported the case of the assessee and not that of the Revenue. ( 13 ) MR. R. N. Bajoria, learned counsel for the assessee, has contended on the other hand, that the judgment of the Supreme Court, in Mahadeo Jalan's case (supra) if read in its entirely supported the case of the assessee and not that of the Revenue. ( 14 ) ON the passage at page 628 of the report of the said judgment cited by Mr. Pal, Mr. Bajoria submitted that the Supreme Court had laid down therein the various factors which were likely to determine the value of a share of company at any particular time. The main factors were, first, the profit earning capacity of the company and second, the company's capacity to maintain such profits in future. It is only in determining the capacity of a company to maintain its profits and thus secure a reasonable return for capital invested, that the asset-backings of an investment company had to be looked into. He submitted that it was not laid down by the Supreme Court that in valuing the shares of an investment company, the profit earning capacity of the company should be ignored entirely and break up method followed. ( 15 ) IN support of this contentions Mr. Bajoria drew our attention to further observations of the Supreme Court in the same decision as follows: (Page 629 ). "from what we have stated, among the factors which govern the consideration of the buyer and the seller where the one desires to purchase and the other wishes to sell, the factor or break up value of a share as on liquidation hardly enters into consideration where the shares are of going concern. The basic yield method in cases where shares are quoted and transactions take place on the share market may not be different but where shares are not quoted, it is in these latter cases the yield must be determined after taking into account various factors as to which a reference has been made earlier. " (Page 630 ). The basic yield method in cases where shares are quoted and transactions take place on the share market may not be different but where shares are not quoted, it is in these latter cases the yield must be determined after taking into account various factors as to which a reference has been made earlier. " (Page 630 ). "but where a person holds share in a company which is making losses and where it does not justify a declaration of dividends even from reserves as a temporary boost or where there is a possibility of its capital structure being affected or if that state of depression continue, in other words, the company is ripe for liquidation, the valuation may well be the break-up value of the shares. " (Pages 633-634 ). "an examination of the various aspects of valuation of shares in a limited company would lead us to the following conclusions: (1) Where the shares in a public limited company are quoted on the stock exchange and there are dealings in them, the price prevailing on the valuation due is the value of the shares. (2) Where the shares are of a public limited company which are not quoted on a stock exchange or of a private limited company the value is determined by reference to the dividends if any, reflecting the profit-earning capacity on a reasonable commercial basis. But, where they do not, then the amount of yield on that basis will determine the value of the shares. In other words, the profits which the company has been making and should be making will ordinarily determine the value. The dividend and earning method or yield method are not mutually exclusive; both should help in ascertaining the profit earning capacity as indicated above. If the results of the two methods differ, an intermediate figure may have to be computed by adjustment of unreasonable expenses and adopting a reasonable proportion of profits. (3) In the case of a private limited company also where the expenses are incurred out of all proportions of the commercial venture, they will be added back to the profits of the company in computing the yield. In such companies the restriction on share transfers will also be taken into consideration as earlier indicated in arriving at a valuation. (3) In the case of a private limited company also where the expenses are incurred out of all proportions of the commercial venture, they will be added back to the profits of the company in computing the yield. In such companies the restriction on share transfers will also be taken into consideration as earlier indicated in arriving at a valuation. (4) Where the dividend yield and earning method break down by reason of the company's inability to earn profits and declare dividends if the set back is temporary then it is perhaps possible to take the estimate of the value of the shares before set-back and discount it by a percentage corresponding to the proportionate fall in the price of quoted shares of companies which have suffered similar reverses. (5) Where the company is ripe for winding up then the break up value method determines what would be realized by that process. (6) As the Attorney General of Ceylon v. Mackie a valuation by reference to the assets would be justified whereas in that case the function of profits and uncertainty of the conditions at the date of the valuation prevented any reasonable estimation of prospective profits and dividends. In setting out the above principles, we have not tried to lay down any hard and fast rule because ultimately the facts and circumstances of each case, the nature of the business, the prospects of profitability and such other consideration will have to be take into account as will be applicable to the facts of each case. But, one thing is clear, the market value unless in exceptional circumstances, to which we have referred, cannot be determined on the hypothesis that because in a private limited company one holder can bring it into liquidation it should be valued as on liquidation by the break-up method. The yield method is the generally applicable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation but none the less is one of the methods. " ( 16 ) THE submissions of Mr. Bajoria are not without substance. The yield method is the generally applicable method while the break-up method is the one resorted to in exceptional circumstances or where the company is ripe for liquidation but none the less is one of the methods. " ( 16 ) THE submissions of Mr. Bajoria are not without substance. From the observation of the Supreme Court it appears to us that the break up method is to be followed only in exceptional circumstances e. g. , where the company is ripe for liquidation not that the said method is to be applied to a particular type of company e. g. an investment Company. Generally, Asset-backing in an investment company is no doubt an important factor, but it is only important for the purpose of determining if an investment company, by reason of its assets can be expected to yield consistent returns on the capital invested and not for the purpose of valuation of the shares of the company by taking the break up value of the assets. ( 17 ) IT is nobody's case that the companys in question were ripe for liquidation at the relevant time or that they were in such a condition that there would be little or no expectation of yield from or earning by them in future. ( 18 ) THE Tribunal has specifically computed the real profit earned by the said two companies. These findings are not challenged. The Tribunal has nowhere referred to the chart printed in the paper book relied on by Mr. Pal. It is not known who has prepared this chart or if the figures therein are correct, Ex. Facie, the percentage of yielding capacity has been calculated in the chart on the basis of average annual net profit and not on actual profits. For the said reasons the purported chart is of little significance in this reference. ( 19 ) WE find that in arriving at the value of the share the Tribunal has taken into account all relevant factors as specified by the Supreme Court viz. the yield, the assets the potentiality and also the quoted value of shares in similar companies. Such valuation in our opinion is not in any way erroneous. ( 20 ) FOR the reasons stated above, we answer the question in the affirmative and in favour of the assessee. the yield, the assets the potentiality and also the quoted value of shares in similar companies. Such valuation in our opinion is not in any way erroneous. ( 20 ) FOR the reasons stated above, we answer the question in the affirmative and in favour of the assessee. In the facts and circumstances of this case there will be no order as to costs. Banerjee, J. : i agree. Questions answered in the affirmative and in favour of the Assessee.