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2010 (5) TMI 832 - HC - Wealth-taxWealth-tax assessment - assessees acquired the right to receive the compensation/ enhanced compensation - admittedly the land of the assessees was acquired u/s. 4 of the LA Act and the compensation was paid during the relevant period of asst. yr. 1995-96. - LA Act was passed at the time when India was not an independent sovereign State and its provisions were designated to compulsorily acquire the land by the State exercising the power of eminent domain to serve the public purpose - whether Tribunal was right in holding that right of the assessee to receive compensation and interest accrued thereon is not liable to wealth-tax? HELD THAT - Tribunal has rightly held that mere right to receive enhanced compensation did not represent any wealth and legally directed its deletion. Therefore we are also of the considered view that such right which would depend upon the outcome of the appeal is not absolute right. The mere right to receive compensation/enhanced compensation is variable speculative and inchoate. Such right cannot be treated as wealth and includible in the previous returns of the assessees as such. Hence the question of law posed in these appeals is answered against the Revenue and in favour of the assessees.
Issues Involved:
1. Whether the right to receive enhanced compensation and interest accrued thereon is liable to wealth-tax. 2. Applicability of the judgments of the Supreme Court in the cases of CWT vs. Smt. Anjamli Khan and Pandit Lakshmi Kant Jha vs. CWT to the present case. 3. Whether the Tribunal's decision, based on the agreement of both parties, was correct and maintainable. Detailed Analysis: 1. Whether the right to receive enhanced compensation and interest accrued thereon is liable to wealth-tax: The primary issue revolves around whether the right to receive enhanced compensation and interest accrued thereon should be included in the wealth of the assessees for the relevant assessment years under the Wealth-tax Act, 1957 (WT Act). The Revenue argued that this right should be treated as an asset and included in the wealth-tax returns of the assessees for the assessment years 1990-91, 1991-92, and 1992-93. The assessees contended that since the matter of enhancement had not been finally decided and no compensation was received during the financial years 1989-90 and 1990-91, the right to receive enhanced compensation could not be treated as an asset for wealth-tax purposes. The assessing authority included the compensation and interest in their assets, but the first appellate authority and the Tribunal disagreed, stating that the right was inchoate and speculative. 2. Applicability of the judgments of the Supreme Court in the cases of CWT vs. Smt. Anjamli Khan and Pandit Lakshmi Kant Jha vs. CWT to the present case: The Revenue cited the Supreme Court judgments in the cases of CWT vs. Smt. Anjamli Khan and Pandit Lakshmi Kant Jha, where it was held that the value of the right to receive compensation under the West Bengal Estates Acquisition Act and Bihar Land Reforms Act should be included in the net wealth of the assessee. However, the court distinguished these cases, noting that the provisions of the Bengal and Bihar Acts are not comparable to the provisions of the Land Acquisition Act (LA Act). The court emphasized that the right to receive compensation under the LA Act is speculative and inchoate, as it depends on the final determination by higher courts, which may vary the compensation amount. Therefore, the judgments in Smt. Anjamli Khan and Pandit Lakshmi Kant Jha were deemed inapplicable to the present case. 3. Whether the Tribunal's decision, based on the agreement of both parties, was correct and maintainable: The Tribunal dismissed the Revenue's appeals, stating that the right to receive enhanced compensation was inchoate and did not represent any wealth in praesenti. The Tribunal's decision was based on the agreement of both parties that such an inchoate right did not represent any wealth. The court upheld the Tribunal's decision, noting that once the Tribunal decided the case with the consent of both parties, the Revenue could not claim that the impugned order was illegal. The court also referenced the Supreme Court judgment in CIT vs. Hindustan Housing & Land Development Trust Ltd., which held that the right to receive enhanced compensation was not income arising or accruing during the relevant previous year and thus not taxable. Conclusion: The court concluded that the mere right to receive enhanced compensation is speculative and inchoate, and cannot be treated as wealth for the purposes of the WT Act. The Tribunal's decision to delete the inclusion of the enhanced compensation in the wealth of the assessees for the relevant assessment years was upheld. The appeals by the Revenue were dismissed, and the question of law was answered against the Revenue and in favor of the assessees.
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