1980 (8) TMI 50 - HC - Wealth-tax

Summary

Issues Involved:
1. Determination of the market value of compensation for land acquired by the government.
2. Inclusion of enhanced compensation, solatium, and interest in the net wealth for assessment years 1965-66 to 1971-72.
3. Evaluation of the right to receive compensation as property under the Wealth Tax Act (W.T. Act).

Issue-wise Detailed Analysis:

1. Determination of the Market Value of Compensation for Land Acquired by the Government:
The assessee owned 7.23 acres of land acquired by the State Government in 1964. Initially, the Land Acquisition Officer awarded Rs. 12,755.75 as compensation. The assessee received this amount under protest and sought higher compensation through a civil court. The Subordinate Judge of Chingleput enhanced the compensation by Rs. 68,030, with an additional solatium of Rs. 10,204.50, totaling Rs. 78,234.50, plus interest. The assessee received Rs. 1,00,756 as additional compensation during the accounting year relevant to the assessment year 1971-72. The Wealth Tax Officer (WTO) estimated the total compensation receivable at Rs. 1,75,000, including it in the net wealth for the assessment years 1965-66 to 1969-70.

2. Inclusion of Enhanced Compensation, Solatium, and Interest in the Net Wealth for Assessment Years 1965-66 to 1971-72:
The WTO included the estimated compensation of Rs. 1,75,000 in the net wealth, instead of the initially received Rs. 12,756. The assessee contested this, arguing that only the received amount should be included. The Appellate Assistant Commissioner (AAC) upheld the WTO's inclusion, stating that the right to obtain market value vested in the appellant and should be valued at market value on each valuation date. The Tribunal, later, directed the WTO to adopt the final compensation amount, including interest and solatium, as the market value in the net wealth.

3. Evaluation of the Right to Receive Compensation as Property under the Wealth Tax Act (W.T. Act):
The Supreme Court's decision in Mrs. Khorshed Shapoor Chenai v. Asst. CED was referenced, which held that the right to receive compensation at market value is "property" and constitutes an asset under both estate duty and wealth-tax. The Supreme Court clarified that the right to receive compensation does not merge into the award by the Land Acquisition Officer but remains alive for litigation. The valuation of this right should consider the peculiar nature of the property, marketability, and the risk or hazard of litigation. The valuation cannot be below the amount awarded by the Land Acquisition Officer but should not equal the claimant's tall claims or the civil court's award.

Conclusion and Directions:
The Tribunal's view that the enhanced compensation awarded by the High Court represents the market value on respective valuation dates was rejected. The Tribunal must reassess whether the WTO's estimate of Rs. 1,75,000 was correct and in accordance with law. The Tribunal may remand the matter to the AAC or WTO if necessary. The question was answered in the negative and in favor of the assessee, with costs awarded to the assessee and counsel's fee set at Rs. 500.