COMMISSIONER OF WEALTH TAX vs MAHADEO JALAN & MAHABIR PRASAD JALAN

The Supreme Court clarified the basis of valuation of shares in private limited companies under Section 7 of the Wealth Tax Act, 1957, establishing that the yield method based on average maintainable profits is the general principle. The Court held that where shares are not quoted on the stock exchange, valuation should consider dividends and profit-earning capacity, and adjustments for unreasonable expenses may be necessary. The ruling emphasized that the break-up method is only applicable in exceptional circumstances, such as when a company is ripe for liquidation.