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Section 55 of the Income-tax Act, 1961 - Capital gains - Cost of acquisition - Assessment year 1973-74 - Assessee, a non-resident foreign company, sold certain shares of an Indian going concern to one 'J' - Those shares were not quoted on stock exchange - In determining cost of acquisition of such shares for computing gains, ITO applied rule 1D of Wealth-tax rules, 1957 and computed fair market value of shares by deducting 15 per cent of break-up value - AAC directed to take fair market value of shares as break up value - Whether since there was no suggestion that situation was such that fluctuations of profit and uncertainty of condition at date of valuation, prevented any reasonable estimation of profit-earning capacity of company, valuation by break-up method could not be justified - Held, yes - Whether since figure arrived at by ITO was favourable to assessee in comparison with figure on basis of profit-earning method, it required no interference - Held, yes FACTS During the accounting year relevant to the assessment year in question, the assessee, a non-resident foreign company, sold certain shares on an Indian company to one 'J'. Those shares had been acquired by the assessee prior to 1954. The assessee opted for the fair market value of the shares as on 1-1-1954. The ITO applied rule 1D of the Wealth-tax Rules, 1957 and computed the fair market value as on 1-1-1954, by deducting 15 per cent from the break-up value. On appeal, the AAC that said rule 1D was not in existence on 1-1-1954 and, therefore, the deduction of 15 per cent under that rule was not warranted. He directed that the fair market value of the shares as on 1-1-1954, be taken to the break-up value. On appeal by the revenue, the Tribunal reversed the order of the AAC and restored that of the ITO. On reference: HELD In the instant case, the shares in question were the shares of a going concern whose shares were not quoted on the stock exchange. It was not a case of sale of shares of a company which was riped for winding-up. There was no suggestion that the situation was such that the fluctuations of profit and uncertainty of conditions at the date of valuation, viz., 1-1-1954, prevented any…

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