1. The following two questions of law have been referred to this court under the provisions of the E.D. Act (hereinafter referred to as 'the Act'), the first at the instance of the accountable person and the second at the instance of the Revenue :
'(1) Whether, on the facts and in the circumstances of the case, the shares in Shanthi Theatres Private Limited could be valued at Rs. 1,500 per share resulting in an inclusion of Rs. 3,37,500 in the value of the estate passing
(2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,55,000 was a proper deduction in the computation of the principal value of the estate of the deceased ?'
2. The late D. Shanmuga Raja, Raja of Sivaganga, died on March 1, 1963. He owned 225 shares of Rs. 1,000 each in the Shanthi Theatres Private Ltd., hereinafter referred to as 'the company', which was carrying on business in exhibition of films. The company was incorporated on December 19, 1958, and the share capital of the company consisted of 750 shares of Rs. 1,000 each. Of the said 750 shares, 225 shares were held by the deceased, 25 shares by the wife of the deceased, 425 shares by Sri Shanmugam, brother of Shri Sivaji Ganesan, and the balance of shares by the other relatives of Shri Sivaji Ganesan. The company suffered losses of Rs. 41,753 and Rs. 1,01,527, respectively, in the years 1960 and 1961. The last balance-sheet prior to the death of the deceased was as on December 31, 1962.
3. The accountable person worked out the value of the shares of the deceased on the basis of the break-up of the company at Rs. 827 but returned the value of the shares for estate duty purposes adopting Rs. 1,000 per share. The Assistant controller of Estate Duty found that though in the first two years there had been a loss in the company, it buildings, land, etc., had substantially gone up in price, since the date of incorporation and the date of death of the deceased and that the accountable person had herself sold her shares of the company at Rs. 1,500 per share after the death of the deceased. Taking Rs. 1,500 per share as the fair market value on the date of death of the deceased, the Assistant Controller valued the shares at Rs. 1,500 per share and included a sum of Rs. 3,37,500 in the value of the estate passing.
4. On appeal, the Appellate Controller upheld the said valuation. the accountable person preferred an appeal to the Income-tax Appellate Tribunal contending that the value of the share adopted by the Assistant Controller on the basis of a sale which took place two years after the death is excessive and that the value returned by the accountable person at Rs. 1,000 per share is itself on the high side. The Revenue contended that the break-up value of the assets or the sale price of the shares on or near about the date of death was a correct indication of the value of the shares near about that date, that though the company sustained loss for the preceding two years, the price of land and building had increased several times and, therefore, the value of the shares as computed by the authorities below should be taken to be fair and reasonable. The Tribunal upheld the value of Rs. 1,500 per share adopted by the authorities below on the ground that the value of the lands, buildings and machinery, etc., had substantially increased between the date of the last balance-sheet from which Rs. 827 per share was worked out on the break-up value method and the date of death of the deceased, that the composition of the shareholding indicates that the deceased and his wife who held 225 shares and 25 shares each respectively were only minority shareholders while the other shareholders who are in the majority were in the management and control of the company and that if after the death of the deceased the wife could sell the share at the rate of Rs. 1,500 per share, that would indicate that the real worth of the share would be considerably more and, therefore, the said price of Rs. 1,500 per share can be taken to be the minimum value which it will fetch if sold on the date of death of the deceased. Aggrieved by the order of the Tribunal, the accountable person has sought and obtained a reference to this court on question No. 1 set out above.
5. At the time of the marriage of the deceased in or about 1945, the deceased was a minor under the tutelage of the Court of Wards, Madras. Arrangements were made for the deceased to marry the Pudukottai Rajah's daughter. Before the actual marriage took place, a marriage settlement was drawn up on December 17, 1945, between the Court of Wards and the Rajkumari Mathuramba Ammani, the finance. According to the said marriage settlement, a sum of Rs. 8 lakhs was to be transferred to the Official Trustee of Madras for investing the same in Government Securities and utilising the income from the same for the named beneficiary, Rajkumari Mathuramba Ammani. It appears that this was also one of the events which preceded the marriage and assured the bride continuous income to there after the marriage. On May 29, 1954, by which time the deceased had come out of the tutelage of the Court of Wards, the said marriage settlement dated December 17, 1945, had been revoked by a deed of revocation with the consent of the beneficiary, Rajkumari Mathuramba Ammani. According to this deed of revocation, in view of the Estates Abolition Act, and the subsequent agricultural reforms introduced by the State, the Raja had been deprived of a substantial portion of his wealth as well as income with the result it had become difficult for him to carry on the day to day activities without calling in aid the sum of Rs. 8 lakhs, the life interest in which vested with his wife, and the revocation has become necessary and the beneficiary has also consented for the revocation. The official trustee was also discharged of the trust effected by the original settlement. However, on September 13, 1954, a note has been prepared by the private secretary to the Raja and submitted to the Rani Saheba, the beneficiary, and the said note is said to contain the terms agreed upon between the husband and wife. The note proceeds on the basis that instead of Rs. 8 lakhs in which the wife has been given a life interest, a sum of Rs. 4 lakhs should be paid outright and the said amount of Rs. 4 lakhs was to be paid as soon as the amounts due from the Government on various land acquisition proceedings were realised or as soon as some profitable investment could be made. It is said that in pursuance of the said agreement, the Raja paid three amounts of Rs. 70,000, Rs. 25,000 and Rs. 50,00, in March, 1958, January, 1959, and August, 1960, respectively, totalling up to Rs. 1,45,000 and the balance of Rs. 2,55,000 as a debt outstanding on the date of the death of the deceased and as such it is deductible from the value of the estate passing. The Assistant Controller did not accept this contention. On appeal, the Appellate Controller held that both the original contract and the subsequent amended agreement involved a consideration as marriage which was no consideration in the eye of law, and, therefore, the claim was not allowable and that, in any event, the claim was hit by s. 46(1)(a) of the Act in so far as the settlement originally made put in the hands of the wife a sum of Rs. 8 lakhs though this was subsequently reduced to Rs. 4 lakhs. Thus, the Appellate Controller upheld the disallowance of the sum of Rs. 2,55,000.
6. The matter was taken in appeal to the Tribunal. Before the Tribunal, the accountable person contended that the marriage settlement should be taken to be enforceable in view of the decision in Visvanathan v. Saminathan, ILR  Mad 83 and Cook's Settlement Trusts, In re  2 WLR 179 and that even if it is not so, the amended agreement of the year 1954 brought into existence a contract of novation and that is enforceable in law. The Tribunal found that the settlement of the year 1945, cannot be said to be a settlement made by the husband on the wife at all, that the settlement was entered into between the Court of Wards and the bride of the deceased and that the sum of Rs. 8 lakhs was set apart as a trust for the benefit of the bride and, therefore, the marriage cannot be taken to be the consideration for the said settlement. According to the Tribunal, if at the time of the marriage of two persons a third party were to make a settlement and it is accepted, neither of the parties to the marriage could be regarded as foreign to the settlement in the first place, but they cannot be said to have entered into an agreement without consideration and, therefore, the Department's contention that the settlement of the year 1945 was one without consideration and liable to be set aside for that reason was not correct. The Tribunal also considered the nature and effect of the modified agreement of the year 1954. According to the Tribunal under the amended agreement of 1954, the original settlement of the year 1945 was substituted by the subsequent arrangement of 1954 and, therefore, the enforceability of the substituted arrangement cannot legally be questioned by the Revenue. The Tribunal then went into the question of the applicability of s. 46(1)(a) to the facts of this case and held that it has no application. The Tribunal, therefore, allowed the claim for deduction of a sum of Rs. 2,55,000. Aggrieved by the decision of the Tribunal, the Revenue has sought and obtained a reference to this court on the second question set out above.
7. As regards the first question, which relates to the valuation of shareas, it is seen that though the accountable person worked out the break-up value of the shares at Rs. 827 per share in her return, she valued the shares at Rs. 1,000 per share taking its face value. It is not in dispute that the break-up value has been adopted on the basis of the balance-sheet prepared for the year 1958 (as on 31-12-1958). The deceased in this case died in 1963, five years after the preparation of the balance-sheet also did not take note of the appreciation of the value of the lands, buildings and machineries possessed by the company. Therefore, the shares cannot be valued on the basis of the break-up value at the rate of Rs. 827 per share, ignoring the considerable appreciation in value of land, building and machinery owned by the company. Even otherwise, it is well established that the break-up value method can properly be adopted only where the company is ripe for winding-up or the situation is such that the fluctuations of profits and uncertainty of conditions at the date of valuation prevent any reasonable estimation of the profit-earning capacity of the company and that the break-up value would not be appropriate for valuation of shares of a going concern. [Vide decisions of the Supreme Court in CWT v. Mahadeo Jalan : 86ITR621(SC) and CGT v. Smt Kusumben D. Mahadevia  112 ITR 38 . The question then is what is the fair market value of the shares. It is not in dispute that the accountable person has sold her shares of the company at Rs. 1,500 per share two years after the death of the deceased. Though the accountable person says that the sale of shares after two years of the death of the deceased could not be taken into account for the purpose of determining the value of the shares on the date of death of the deceased, we find that there is no evidence to indicate that there was considerabel variation in price between the date of the death of the deceased and the actual date of the sale of the shares by the accountable person. As pointed out by the Tribunal, after the death of the deceased, the accountable person could not have been in a position to aset as against the other major shareholders who were in management and control of the company and, therefore, the fact that the accountbale person was able to sell at Rs. 1,500 per share on the date of death of the deceased would indicate that the shares would have been more valuable on the date of death of deceased. Therefore, the value of the shares at Rs. 1,500 per share can reasonably be taken as the fair market value especially when there is no evidence adduced by the accountable person that due to certain specified factors there was a rise in price after the death of the deceased and, therefore, the value at Rs. 1,500 per share should not be taken as the value on the date of death of the deceased. In this view, we are inclined to agree with the view taken by the Tribunal and uphold the valuation of the shares by the authorities below. The first question is, therefore, answered in the affirmative and against the accountable person.
8. Coming to the second question, it is seen from the facts stated above that the Tribunal proceeded on the basis that the original arrangement of the year 1945 was substituted by a new arrangement of the year 1954, that as a result of the new arrangement the life interest in the corpus of Rs. 8 lakhs set apart for the benefit of the bride was substituted by an outright cash payment of Rs. 4 lakhs and that the substituted arrangement is enforceable at law as it is supported by consideration. however, we are of the view that the Tribunal has committed a factual error in proceeding on the basis that there was a substituted arrangement in the year 1954 under which the decease had agreed to pay Rs. 4 lakhs to his wife in pace of the provision made in the original arrangement of the year 1945. As a matter of fact, the arrangement of the year 1954 was only a revocation of the original arrangement of the year 1945 with the consent of the wife of the deceased and this revocation was not subject to any condition that the deceased should give a sum of Rs. 4 lakhs as consideration for the revocation. We have before us the revocation deed dated May 29, 1954. This document has been executed both by the deceased and his wife. The document refers to the execution of an earlier deed of settlement dated December 17, 1945, and states that in view of the Sivaganga estate having been taken over by the Government and as both the deceased and his wife were put to the necessity of borrowing individually as well as jointly for meeting their family and other personal expenses and as such the borrowings are mounting up, both of them have mutually agreed that the deed of the marriage settlement shall be revoked and cancelled with effect from the date of the revocation deed ad that the official trustee shall stand discharged of the trust as and from the date of the deed of revocation. The revocation deed does not contain any condition that the deceased should provide to his wife cash consideration of Rs. 4 lakhs either as consideration for the revocation of the original settlement deed of the year 1945 or otherwise. Therefore, the deed dated May 29, 1954, executed by the deceased and his wife is only a deed of revocation of the earlier settlement deed dated December 17, 1945, and it does not amount to a deed of substitution of the original arrangement of the year 1945. After the execution of the revocation deed, the deceased was not under a liability to pay any amount to his wife and the Tribunal is, therefore, in error in proceeding on the basis that the deceased under took the liability in a sum of Rs. 4 lakhs as against the original sum of Rs. 8 lakhs set apart under the settlement deed of the year 1945. It is seen that it is only under the note dated September 13, 1954, made by the private secretary to the deceased Raja and submitted to the wife of the deceased, an outright payment of Rs. 4 lakhs is set out. The said note cannot take the place of an enforceable document. Even assuming that the arrangement between the deceased Raja and his wife in September, 1954, could be culled out from the said note, that arrangement will be devoid of any consideration for the wife of the Raja has given up her right under the original settlement of the year 1945 by the revocation deed dated May 29, 1954, and there was no consideration proceeding from the wife to the husband to sustain the alleged arrangement entered into on September 13, 1954, which is the subject-matter of the note referred to above. Even if the husband has undertaken the liability for an outright payment of Rs. 4 lakhs to the wife as recorded by the personal secretary to the deceased Raja in the said note, it would be without consideration, for the earlier settlement of the year 1945 has already been revoked on May 29, 1954, and there is no liability on the part of the deceased to pay any amount to his wife thereafter. If the husband has agreed to pay Rs. 4 lakhs later on September 13, 1954, it is clearly unsupported by any consideration and as such it cannot be enforced at all. In this view of the matter, we have to disagree with the view taken by the Tribunal and hold that the accountable person is not entitled to deduct a sum of Rs. 2,55,000 as a debt due by the deceased. The second question is, therefore, answered in the negative and against the accountable person. The Revenue will have its costs from the accountable person. Counsel's fee Rs. 500 (one set).