AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 26 (3) of the Gift-tax Act, 1958, for the assessment year 1980-81 the Tribunal has referred the following question for our opinion :"whether, in view of the fact that Rule 1d of the Wealth-tax Rules, 1957, is an accepted procedure for determining market value of unquoted shares, the Tribunal was justified in holding that Section 6 (3) of the Gift-tax Act, 1958, does not indicate that market value of shares gifted is to be determined with reference to Rule 1d of the Wealth-tax rules, 1957, and in that view cancelling the order of the Commissioner of Gift-tax under Section 24 (2) of the Gift-tax Act, 1958 ?" ( 2 ) SHORTLY stated, the facts leading to this reference are as follows : the Gift-tax proceedings were initiated by the Gift-tax Officer in the hands of the assessee for the assessment year in question as the Gift-tax Officer was of the opinion that the gifts chargeable to tax had escaped assessment. The facts relating to the initiation of proceedings under Section 24 of the Gift-tax Act, 1958, were that Sri Madanlal Patodia and Sri Brijilal Patodia (now deceased) gifted 1,000 and 800 shares of GTN Textiles Ltd. on April 24, 1979 and April 27, 1979, at their face value. ( 3 ) THE Commissioner of Income-tax (Appeals) found that while the Gift-tax Officer took the value of the shares at Rs. 102. 50 for the purpose of gift-tax assessment, the assessee himself had shown the value of each share of GTN Textiles Ltd. , in the assessment year 1980-81, at Rs. 633. 44. This prompted him to issue the notice dated May 13, 1986, calling upon the assessee to show cause why the assessment order as passed by the Gift-tax Officer should not be set aside for suitable modification as the same order was erroneous in so far as it was prejudicial to the interests of the Revenue, the value of the shares gifted being taken at too low a price. The assessee submitted that the break-up value of the shares worked out to Rs. 633. 44 each and that value was shown in the wealth-tax return as per Rule 1d of the Wealth-tax Rules. The assessee submitted that the break-up value of the shares worked out to Rs. 633. 44 each and that value was shown in the wealth-tax return as per Rule 1d of the Wealth-tax Rules. According to the assessee, for the purpose of gift-tax, the provisions of the Wealth-tax Rules were not applicable and Rule 1d of the Gift-tax Rules required the valuation to be made on yield method which well justifies the value adopted by the Gift-tax Officer. The assessee also submitted that the said shares were eventually sold by the Union Bank of India and the State Bank of India at the rate of Rs. 102. 50 and Rs. 101 each, respectively. But the Commissioner of Gift-tax held that since the assessee even after the said sale by the banks showed the value of the shares at Rs. 633. 44 for wealth-tax, the Gift-tax Officer should have taken that as the value of each of the gifted shares. He, therefore, set aside the assessment. ( 4 ) BEING aggrieved, the assessee filed an appeal before the Tribunal against the order of the Commissioner of Gift-tax passed under Section 24 of the Gift-tax Act. The Tribunal was of opinion that the order passed by the Gift-tax Officer was not erroneous and prejudicial to the interests of the Revenue. Hence, the Tribunal cancelled the order of the Commissioner of Gift-tax and restored that of the Gift-tax Officer. ( 5 ) IT has been pointed out in the order under Section 24 (2) that both the assessees disclosed the break-up value of the shares at Rs. 633. 44 per share as on the valuation date ending Dewali, 1979 (20th October, 1979), in accordance with the provisions contained in Rule 1d of the Wealth-tax Rules, 1957. It has been argued that the charging provisions under the Wealth-tax Act as also under the Gift-tax Act were different as the words used in Section 7 (1) of the Wealth-tax Act to the effect that "subject to any rules made in this behalf. . . It has been argued that the charging provisions under the Wealth-tax Act as also under the Gift-tax Act were different as the words used in Section 7 (1) of the Wealth-tax Act to the effect that "subject to any rules made in this behalf. . . " do not find a place in Section 6 (1) of the Gift-tax Act, in terms of which the value of any property, subject to the provisions of Sub-sections (2) and (3), shall be estimated to be the price which in the opinion of the Gift-tax Officer it would fetch if sold in the open market on the date on which the gift was made. It has been pointed out that Sub-section (3) refers to Rule 1d which can be made applicable in valuing the shares gifted of a private company and not to the shares gifted of a public company. Our attention was drawn to the assessee's reply to the show-cause notice issued by the Commissioner of Gift-tax wherein it was mentioned by placing reliance on the Supreme Court decision in the case of CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 that the value of the shares should be determined on yield basis since G. T. N. Textiles Ltd. was a going concern. The assessee's learned counsel in this connection referred to the Bombay High Court decision in the case of Seth Hemant Bhagubhai Mafatlal v. N. Rama Iyer, GTO [1983] 144 ITR 737, wherein it was held that the valuation of shares of a private limited company which is a going concern and which is not ripe for liquidation can only be arrived at under the provisions of Section 6 (1) of the Gift-tax Act on the basis of the profit-earning. ( 6 ) IT is thus contended by learned counsel for the assessee that it is not in dispute that the company of which the unquoted equity shares have been valued is a going concern. It is not the case of the Revenue that the company is ripe for liquidation and, therefore, the yield method of valuation is not appropriate. So, in his submission, the decision of the Supreme Court in Kusumben D. Mahadevia [1980] 122 ITR 38, has to hold the field. It is not the case of the Revenue that the company is ripe for liquidation and, therefore, the yield method of valuation is not appropriate. So, in his submission, the decision of the Supreme Court in Kusumben D. Mahadevia [1980] 122 ITR 38, has to hold the field. ( 7 ) IT is urged on behalf of the Revenue that the Supreme Court in Kusumben D. Mahadevia's case [1980] 122 ITR 38, did not go into the question as to what would be the effect of the company being a company of which the shares are not freely transferable. Our attention was invited in this connection to Rule 10 (1) of the Gift-tax Rules, 1958, which reads as follows :"rule 10 (1) : The value of a policy of insurance shall be its cash surrender value on the date on which the gift was made. ""rule 10 (2) ; Where the articles of association of a private company contain restrictive provision as to the alienation of shares, the value of the shares, if not ascertainable by reference to the value of the total assets of the company, shall be estimated to be what they would fetch if on the date of gift they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the articles, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded. " ( 8 ) THE Revenue's contention is that in the instant case there is no suggestion that the articles of the company do not contain restrictive provisions as to the transfer of the shares. In such a situation, the rule gives a mandate that it should be ascertained with reference to the value of the total assets of the company. It is only where such asset backing method fails to be applied, that the question of adoption of the other method or methods may arise. But obviously in this case there is no impracticability of valuing the shares with reference to the assets. Therefore, the adoption of any alternative method does not arise. ( 9 ) WE find substance in the contention of the Revenue. It also accords with the view we have taken in CWT v. India Exchange Traders' Association. But obviously in this case there is no impracticability of valuing the shares with reference to the assets. Therefore, the adoption of any alternative method does not arise. ( 9 ) WE find substance in the contention of the Revenue. It also accords with the view we have taken in CWT v. India Exchange Traders' Association. It has been pointed out by us in the said decision that the Supreme Court declined to consider the effect of inalienability of shares of a company and its impact, where restrictive provisions are contained in the articles of association, as that was not a question urged before the Tribunal or the High Court. Therefore, the effect of Rule 10 (2) in a case where transfer of shares is restricted by the articles had no occasion to be considered by the Supreme Court. The Supreme Court decided the case in Kusumben D, Mahadevia [1980] 122 ITR 58, entirely de hors the provisions of the said rule, de hors the question of inalienability. The provisions of the rule are also part of the legislation with the difference that it is a delegated legislation concerning the details which the Legislature by design and discretion leaves to the rule making authority to work out. The power of the rule-making authority to frame rules as part of the legislation emanates from Section 46 of the Gift-tax Act. Subsection (2) (a) specifically authorises the Board as the rule-making authority to make rules to provide for the manner in which the value of any property may be determined. Moreover, the rule-making power is not free from legislative supervision as Sub-section (4) of Section 46 requires every rule made under the Act to be laid as soon as may be after it is made, before each House of Parliament, and must have ratification by both Houses. Thus the rule has also parliamentary sanction and cannot be lightly treated as directory and not mandatory as has been urged on behalf of the assessee, except where the rule itself manifests the intention of the provisions being of a directory nature. But a reading of Rule 10 (2) tends to make it amply clear that it is mandatory. The only thing that is noticeable in contradistinction to Rule 1d is that Rule 10 (2) provides for an option in specific circumstances, viz. But a reading of Rule 10 (2) tends to make it amply clear that it is mandatory. The only thing that is noticeable in contradistinction to Rule 1d is that Rule 10 (2) provides for an option in specific circumstances, viz. , the break-up value method not being practicable in the circumstances of a particular case. But the question of impracticability does not appear from the facts of the case. ( 10 ) MOREOVER, we also observe the fact that the subsequent amendment to the Gift-tax Act has supplanted Rule 10 (2) by Schedule II to the Act itself where it has been expressly said that the same method of valuation should apply to an asset for the purpose of gift-tax as prescribed by the Wealth-tax Act. Schedule III to the Wealth-tax Act in turn has incorporated in the Act the same method of valuation what has been Rule 1d. Rule 1d also stands supplanted. By incorporating the rules in the enactment, the Legislature has clearly shown its intention to be, from the very beginning, that the break-up value method should be followed in the valuation of unquoted shares of a private company whose articles of association contain restrictive provisions as to the alienation of its shares. ( 11 ) FOR the reasons aforesaid, we answer the question in this reference in the negative and in favour of the Revenue and against the assessee. There will be no order as to costs. `