Dipak Kumar Sen, J.
1. The present reference arises out of the wealth-tax assessment of the estate of late Sir E.C. Benthal in the hands of his executors in the assessment years 1957-58 and 1958-59, the relevant valuation dates being the 31st March of the calendar years 1957 and 1958. The items involved are 13,280 ordinary shares and 45,000 deferred shares of Messrs. Bird & Co. (P.) Ltd. and 5,255 ordinary and 20,000 deferred shares of Messrs. F.W. Heilgers & Co. (P.) Ltd. The face value of the ordinary shares of both the companies are Rs. 100 per share and the face value of the deferred shares of both are Rs. 10 per share.
2. For the assessment year 1957-58, the WTO estimated the market value of the ordianry shares of Messrs. Bird & Co. (P.) Ltd. at Rs. 172 per share and that of Messrs. F. W. Heilgers & Co. (P.) Ltd. at Rs. 198 per share and the deferred shares of both the said companies at 1/10th of the value of their respective ordinary shares estimated respectively as aforesaid. For the assessment year 1958-59, the value of the ordinary shares was estimated at Rs. 163 per share of Messrs. Bird & Co. (P.) Ltd. and Rs. 169 per share of Messrs. F. W. Heilgers & Co. (P.) Ltd. and that of deferred shares of the said companies at 1/10th of the aforesaid.
3. On appeal, such valuations were upheld by the AAC. On further appeal by the assessee before the Income-tax Appellate Tribunal, it was contended that while determining the break-up value of the shares of the two companies on the basis of the balance-sheet, deduction should have been made of the proposed dividends on the cumulative preference shares. There was no dispute that the break-up value of the shares would be taken as the market value thereof. The Tribunal held that while the proposed dividends on cumulative preference shares might or might not be recorded as debt owed by the assessee for the purpose of determining the net wealth of the companies concerned, such proposed dividends being a first charge on the profits of a company would certainly enter into the calculation of a prudent buyer of such ordinary and deferred shares as a holder of ordinary and deferred shares would be entitled to dividend only out of the surplus, if any, remaining after the payment of dividend on cumulative preference shares. The Tribunal accordingly upheld the contention of the assessee and held that there should be deduction of proposed dividends on cumulative preference shares in the case of both the companies.
4. On an application by the CWT, West Bengal III, under Section 27(1) of the W.T. Act, 1957, the Tribunal has drawn up a statement of case and has referred the following question of law as arising out of its order for the opinion of this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in determining the market value of the deferred and the ordinary shares held by the assessee in Messrs. Bird & Co. (P.) Ltd. and Messrs. F. W. Heilgers & Co. (P.) Ltd. the proposed dividends on cumulative preference shares were required to be deducted from the gross value of the assets of the two companies as at the relevant valuation dates ?'
5. It appears to us that though the parties proceeded on the admitted basis that the shares of the said two companies would be valued on the break-up method and there was no dispute as to the method of valuation yet by reason of a subsequent judgment of the Supreme Court in CWT v. Mahadeo Jalan : 86ITR621(SC) , the controversy in these proceedings stands determined. The Supreme Court laid down that for the purpose of computing wealth-tax, the shares of a company have to be valued under Section 7 of the W.T. Act, 1957, on the following principles (p. 633):
' (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 date 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 shades. In other words, the profit 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 proportion to 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 realised by that process.
(6) As in Attorney-General of Ceylon v. Mackie  2 AH ER 775 (PC), a valuation by reference to the assets would be justified where as in that case the fluctuations of profits and uncertainty of the conditions at the date of the valuation prevented any reasonable estimation of prospective profits and dividends.
6. 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 considerations will have to be taken 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 the exceptional circumstances or where the company is ripe for liquidation but none the less is one of the methods.'
7. We direct the Tribunal to apply the principles as laid down by the Supreme Court noted above and determine the value of the said shares. The reference is disposed of accordingly. In the facts and circumstances, there will be no order as to costs.
Bimal Chandra Basak, J.
8. I agree.