1986 (5) TMI 59 - AT - Wealth-tax

Summary

Issues:
1. Exemption under s. 5(1)(i) of the WT Act for holding property under a trust.
2. Inclusion of enhanced compensation in the wealth of the assessee.
3. Valuation of right to receive compensation for wealth tax purposes.

Analysis:

Issue 1:
The first issue pertains to the exemption under s. 5(1)(i) of the Wealth Tax Act for holding property under a trust for charitable purposes. The Tribunal, in a previous case, had held that no charitable trust had come into being. Therefore, the appeal on this ground was dismissed due to lack of merit.

Issue 2:
The second issue involves the inclusion of enhanced compensation in the wealth of the assessee. The Additional District Judge awarded enhanced compensation, which the WTO included in the net wealth of the assessee. The AAC upheld this inclusion and further enhanced the assessment based on subsequent compensation received. The Tribunal considered the timing of receipt of compensation, the hazards of litigation, and the finality of the compensation amount. The Tribunal modified the AAC's order by recalculating the additions to the net wealth based on the value of the right to receive compensation on the valuation date.

Issue 3:
The final issue concerns the valuation of the right to receive compensation for wealth tax purposes. The Tribunal referred to a Supreme Court judgment that emphasized evaluating the property at market value on the relevant date. The Tribunal considered the uncertainties, hazards of litigation, and the finality of the compensation amount. It directed the WTO to recalculate the additions to the net wealth based on deductions for interest and uncertainties in the compensation amounts.

In conclusion, the Tribunal partly allowed the appeal, modifying the AAC's order regarding the valuation of the right to receive compensation for wealth tax purposes.