1995 (3) TMI 7 - SC - Wealth-tax

Right to receive Compensation - Whether the right to compensation under the West Bengal Estates Acquisition Act 1953 constitutes an asset within the meaning of the Wealth-tax Act and specially in view of the fact where such compensation under the West Bengal Estates Acquisition Act has neither been determined nor paid - Held yes - valuation already made by the Wealth-tax Officer and the appellate authority shall be ignored and a fresh valuation should be made

Summary

Issues:
Appeal against judgment of Calcutta High Court under Wealth-tax Act for assessment years 1957-60 - Right to receive compensation under West Bengal Estates Acquisition Act as asset - Tribunal's decision in favor of assessee - Referral of question to High Court - High Court's negative answer - Comparison with precedent case - Supreme Court allowing appeals in favor of Revenue - Direction for valuation of asset.

Analysis:
The appeals were filed against a common judgment of the Calcutta High Court regarding three references made under the Wealth-tax Act for the assessment years 1957-58, 1958-59, and 1959-60. The respondent-assessee's right to receive compensation under the West Bengal Estates Acquisition Act was considered an asset under the Wealth-tax Act, and its value was included in the total wealth. The Appellate Assistant Commissioner reduced the value, but the Tribunal ruled in favor of the assessee. However, the Tribunal referred a question to the High Court regarding the assessee's right to receive compensation. The High Court reframed the question to determine if the right to compensation constitutes an asset under the Wealth-tax Act, especially when compensation is undetermined and unpaid. The High Court answered in favor of the assessee, but the Supreme Court noted a precedent case where a similar issue was decided differently.

The Supreme Court found that the precedent case disapproved the judgment under appeal, emphasizing that the moment an assessee's land is acquired by the State, they become entitled to compensation, even if the amount is not immediately determined. The Supreme Court allowed the appeals in favor of the Revenue, overturning the High Court's decision. The Court directed that the value of the right to receive compensation should be the present value, determined as of the valuation date, considering all relevant aspects. The Wealth-tax Officer was instructed to allow both parties to present their contentions during the valuation process. The Court emphasized that any prior valuations made by the Wealth-tax Officer and appellate authority should be disregarded, and a fresh valuation conducted as per the directions provided.

In conclusion, the Supreme Court allowed the appeals in favor of the Revenue, overturning the High Court's decision regarding the right to receive compensation as an asset under the Wealth-tax Act. The Court provided detailed directions for the valuation of the asset, emphasizing the present value and the consideration of all relevant aspects during the valuation process. The Wealth-tax Officer was instructed to conduct a fresh valuation, allowing both parties to present their contentions.