Commissioner of Wealth-tax vs Kanhi Ram Sihi

Adarsh Kumar Goel, J.—The Income Tax Appellate Tribunal, Delhi Bench ''D'', New Delhi, has referred following question of law arising out of its order dated 2-9-1987 in WTA Nos. 247, 248, 249, 250/D/1987 for assessment years 1973-74,1977-78,1978-79 and 1979-80 u/s 27 of the Wealth-tax Act, 1957 (for short, ''the Act'') for opinion of this Court:

Whether, on the facts and in the circumstances of the case, the IT AT was correct in law in fixing the value of assessee''s right to compensation at the rate of 20 per cent of the additional compensation ?

Land of the assessees was acquired by the State. Vide award dated 26-3-1973, the Collector awarded compensation. The assessee preferred reference u/s 18 of the Land Acquisition Act, 1894, which was decided by the Reference Court on 30-9-1978, awarding enhanced compensation. There was further enhancement in appeal by this Court vide judgment dated 17-12-1979. The assessee filed return for the assessment years in question on 1-5-1985 in response to notice u/s 17 of the Act. The assessee claimed that value of right to receive compensation should be taken at 20 per cent. The Assessing Officer however, held that value of the asset i. e., the right to receive compensation would be the value, which stood determined by this Court. The appellate authority upheld the plea of the assessee, which order has been affirmed by the Tribunal.

Learned Counsel for the revenue submitted that there was no basis for valuing the right to receive compensation at 20 per cent of the amount of the value determined by the Court. He placed reliance on judgments of the Hon''ble Supreme Court in Commissioner of Wealth-tax, Kolkata Vs. Smt. Anjamli Khan, , CWT v. U.C. Mehatab [1998] 231 ITR 501 : 99 Taxman 6 and judgment of Delhi High Court in Commissioner of Wealth Tax Vs. Hari Shankar Rastogi, .

Learned Counsel for the assessee supports the impugned order.

It is not disputed even by learned Counsel for the assessee that right to receive compensation will be ''asset'' u/s 2(e) of the Act for the purpose ''net wealth'' which is subjected to wealth tax u/s 3 of the Act but he submits that value of the said asset will only be value on the valuation date as defined in Section 2(q) of the Act i.e., the last date of the previous year. On the valuation date, the assessee has a right to receive compensation but its value will not be the value finally determined but will have to be hypothetically determined on the basis of assessment even if factually value has been determined.

In Smt. Anjamli Khan''s case (supra), the Hon''ble Supreme Court observed:

... It is clear that, where the compensation, as here, is to be determined and is payable at a date much later than the valuation date, the value of the assessee''s right to receive the compensation can only be the ''present'' value (i.e., the value as on the valuation date of the amount) that may be determined and paid as compensation in future. It cannot be equal to the amount of compensation payable under the Act. The present value of the future compensation, will, therefore, have to be determined on a consideration of all relevant aspects that may be put forward before the Tribunal. (p. 352)

Thus, value to be determined is not to be equal to future compensation which the assessee may receive as per Land Acquisition Act but present value of such compensation which is to be received in future. Such assessment has to be on notional basis. The fact that the assessee has not received the amount on the valuation date cannot be ignored. What is being valued is only right to receive compensation.

Learned Counsel for the revenue submits that assessment of 20 per cent in the present case is arbitrary particularly when on date of assessment, rate of enhanced compensation was known. We do not find any merit in this submission for the reason already given. Right to receive compensation on a given date cannot be equal to compensation received on a future date. However, we make it clear that assessment has to be made from case to case on consideration of "all relevant facts", as observed by Hon''ble the Supreme Court.

We, accordingly, answer the references in above terms.