1989 (2) TMI 130 - AT - Wealth-tax

Acquisition Proceedings, Immovable Property, Land Acquisition, Movable Property, Right To Receive Compensation, Wealth Tax

Summary

Issues:
Taxation of compensation received in land acquisition proceedings in the hands of the assessee.

Analysis:
The judgment revolves around the taxation of compensation received by the assessee in a land acquisition case. The primary issue was whether the entire compensation amount should be taxed in the hands of the assessee or only a proportionate share based on her entitlement. The assessee had declared a partial partition of the property, resulting in her entitlement to a 1/9th share. The Income-tax Officer taxed the capital gains based on the full compensation amount, leading to a dispute. The Tribunal directed the taxation of capital gains based on the 1/9th share received by the assessee. Additionally, for another assessment year, the Tribunal held that no income tax could be levied on the interest portion of the compensation.

The counsel for the assessee argued that only the 1/9th share of compensation should be considered as the wealth of the assessee for the relevant assessment years. Alternatively, it was suggested that if the full compensation amount was deemed part of the assessee's wealth, the value should be ascertained considering the difficulty of recovering the amount already paid to others.

On the other hand, the Departmental Representative relied on a previous Tribunal order in gift-tax proceedings, asserting that the property and compensation belonged to the assessee despite payment to other HUF members. The argument was based on the ownership of the property and the right to receive compensation, irrespective of physical possession by others.

The Tribunal emphasized that the crucial fact was the actual receipt of compensation, transforming the right to receive compensation into hard cash. The Tribunal considered the bank-slip book showing separate vouchers for compensation payments, indicating the actual receipt of funds by other HUF members. It was concluded that wealth tax could not be levied on any portion of compensation exceeding the 1/9th share received by the assessee.

In conclusion, the appeals were allowed, affirming that wealth tax could not be imposed on the assessee for any amount of compensation beyond her 1/9th share.