COMMlSSlONER OF GIFT TAX, GUJARAT vs EXECUTORS & TRUSTEES OF THE ESTATE OFLATE SH. AMBALAL SARAB

The Supreme Court held that the correct principle of valuation for shares not quoted on the stock exchange is a question of law, specifically the profit earning method. The Court ruled that parties can agree on a permissible valuation principle, but the Revenue is not precluded from asserting the correct legal position. The High Court's reliance on the break-up value method was deemed incorrect, and the appeal was allowed, establishing that the profit earning method should be applied in such cases under Section 15(3) of the Gift Tax Act, 1958.