1982 (4) TMI 134 - AT - Income Tax

Agricultural Land, Held By Assessee, Land Acquisition, Right To Receive Compensation, Valuation Date, Wealth Tax

Summary

Issues Involved:
1. Whether the compensation received by the assessee for acquired land is taxable under the Wealth-tax Act.
2. Whether the right to receive compensation for the acquired land existed on the valuation date.

Detailed Analysis:

1. Taxability of Compensation Received by the Assessee:

The assessee contended that the compensation received for the acquired land should not be included in the wealth-tax assessment as the land was agricultural and exempt from wealth-tax. The Commissioner (Appeals) held that the compensation received by the assessee was taxable as it accrued during the assessment year under appeal. The revenue argued that the Commissioner (Appeals) was not justified in deleting the addition of Rs. 8,46,550 made by the WTO on account of intended compensation to be received by the assessee from the Government.

The Tribunal examined the facts and found that the land was acquired by the Government, and the assessee received compensation of Rs. 1,77,936.40 from the Land Acquisition Collector and Rs. 22,856.79 from the Additional District Judge. The assessee had also claimed an additional compensation of Rs. 8,46,550 in the Delhi High Court. The Tribunal held that the right to receive compensation is an asset within the meaning of the Wealth-tax Act, 1957, and should be included in the net wealth of the assessee.

2. Existence of Right to Receive Compensation on the Valuation Date:

The assessee argued that as on the valuation date (31-3-1968), he owned agricultural land, and no right to receive compensation existed. The Tribunal noted that the land was acquired by the Government through notifications under sections 4 and 6 of the Land Acquisition Act. However, the right to receive compensation arises only when the award is made or the land vests with the Government.

The Tribunal referred to sections 4, 6, and 16 of the Land Acquisition Act to determine the point at which the right to receive compensation accrues. It concluded that the right to receive compensation accrues when the award is made under section 11 or filed under section 12 of the Land Acquisition Act. In this case, the award was announced on 13-11-1968, and the tender of payment was made on 12-11-1968. Therefore, as on the valuation date (31-3-1968), the assessee owned agricultural land, and no right to receive compensation existed.

Conclusion:

The Tribunal held that the right to receive compensation accrued to the assessee on 12-11-1968, which was after the valuation date of 31-3-1968. Consequently, the assessee was owning agricultural land on the valuation date, which is not a taxable asset under the Wealth-tax Act. The appeal by the assessee was allowed, and the appeal by the revenue was dismissed. The orders of the lower authorities were reversed accordingly.