1982 (3) TMI 142 - AT - Income Tax

Summary

Issues Involved:
1. Valuation of enhanced compensation for land acquisition.
2. Valuation of interest awarded on enhanced compensation.
3. Market value of land on valuation dates prior to land acquisition.

Issue-wise Detailed Analysis:

1. Valuation of Enhanced Compensation for Land Acquisition:
The primary issue pertains to the valuation of the right to receive enhanced compensation for land acquired by the government. The assessee owned 7.31 acres of land, and the initial compensation awarded was Rs. 1,02,068. The sub-judge later enhanced this compensation to Rs. 7,94,267, leading to an additional entitlement of Rs. 6,92,199. The WTO initially valued this enhanced compensation at Rs. 6.94 lakhs for the assessment years 1971-72 to 1974-75 and Rs. 7.13 lakhs for 1975-76, including interest. The AAC, however, directed to take 50% of the enhanced compensation for each valuation date, which was contested by the assessee.

The Tribunal, referencing its previous order and the Andhra Pradesh High Court's observations, concluded that the percentages prescribed by the CBDT Circular No. 2-D(WT) of 1964 should be applied and further discounted by 50%. This approach considers the uncertainty and prolonged nature of compensation determination under the Land Acquisition Act. Consequently, the Tribunal directed the following percentages of the enhanced compensation to be adopted for the respective assessment years:
- 1971-72: 20%
- 1972-73: 20%
- 1973-74: 22.5%
- 1974-75: 25%
- 1975-76: 27.5%

2. Valuation of Interest Awarded on Enhanced Compensation:
The AAC had directed that 50% of the interest awarded should be considered for the assessment years 1974-75 and 1975-76. The Tribunal modified this to 25% for 1974-75 and 27.5% for 1975-76, aligning with the percentages applied to the enhanced compensation. For earlier years, the Tribunal adhered to its previous conclusion that no value should be taken for interest prior to its actual awarding, as it was a matter of court discretion and had no marketable value.

3. Market Value of Land on Valuation Dates Prior to Land Acquisition:
For the assessment years 1969-70 and 1970-71, the issue was the market value of the land before the acquisition. The WTO adopted the enhanced compensation figure, while the assessee had shown lower values in his returns. The Tribunal noted that the land was under a compulsory acquisition notification, which would depress its market value. It rejected the WTO's approach of using the enhanced compensation figure directly, considering it unrealistic.

Instead, the Tribunal determined that the land's value should be Rs. 2.25 lakhs for each of the assessment years 1969-70 and 1970-71. This figure accounted for the initial compensation and a reasonable adjustment for the enhanced compensation, considering the notification's depressing effect.

Conclusion:
The Tribunal allowed the appeals in part, directing specific percentages of the enhanced compensation and interest to be considered for the relevant assessment years and adjusting the land value for the years prior to acquisition to Rs. 2.25 lakhs. The judgment balanced the uncertainties in compensation determination with practical valuation approaches, adhering to legal precedents and CBDT guidelines.