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H.H. Maharaja Lokendra Singhji Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 288 of 1982
Judge
Reported in[1984]150ITR68(MP)
ActsWealth Tax Act, 1957 - Sections 2; Land Acquisition Act, 1894
AppellantH.H. Maharaja Lokendra Singhji
RespondentCommissioner of Wealth-tax
Appellant AdvocateG.M. Chaphekar, Adv.
Respondent AdvocateR.C. Mukati, Adv.
Cases ReferredKhorshed Shapoor Chenai v. Asst.
Excerpt:
- - 12,78,328 by the high court and in complete disregard to the attendant circumstances like the risks or hazards of litigation for securing enhanced compensation, time consuming factor and huge expenses incurred on lawyers and staff in vindication of the right ? (4) whether, on the facts and in the circumstances of the case, the appellate tribunal was justified in holding that valuation of 1/2 portion of 'shri durga jyoti',indore, adopted by the wto at rs. the tribunal held that as regards the valuation of immovable property, the wto and the commissioner had failed to apply rule 1bb of the w......noted that the possession of this land was taken by the government on february 26, 1965, and the date of valuation in this case is march 31, 1974. so far as the taxability of the right to receive the enhanced compensation is concerned, their lordships of the supreme court in the case of pandit lakshmi kantjha v. cwt : [1973]90itr97(sc) , have already decided the issue holding that the right to receive compensation, even though the date of payment is deferred, is property and constitutes an asset for the purpose of the w.t. act, 1957, the same view has been affirmed in another decision of the supreme court in khorshed shapoor chenai v. asst. ced : [1980]122itr21(sc) , wherein it has been held that the lands, which are compulsorily acquired by the government during the lifetime of the.....
Judgment:

Sohani, J.

1. By this reference under Section 27(1) of W.T. Act, 1957 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion:

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the contingent right to claim enhanced compensation is a valuable right and, therefore, an asset and consequently ' property ' under Section 2(e) and 2(m) ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the contingent right to enhanced compensation accrued to the petitioner from the very date oftaking possession of the land by the Government on February 26, 1965, and, therefore, an asset on the relevant valuation date, viz., March 31, 1974, contrary to the fact that the High Court awarded a decree on April 26, 1977, against which the State Government filed an application for grant of special leave to appeal and the Supreme Court dismissing the same on April 10, 1978 and, consequently, the right being non-existent on the relevant valuation date, no asset existed on March 31, 1974 ?

(3) Whether, if the answer to the question of law in para (2) is in the affirmative, the Appellate Tribunal was justified in confirming the market value as on March 31, 1974, at Rs. 11,91,047, as determined by the WTO against the amount awarded at Rs. 12,78,328 by the High Court and in complete disregard to the attendant circumstances like the risks or hazards of litigation for securing enhanced compensation, time consuming factor and huge expenses incurred on lawyers and staff in vindication of the right ?

(4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that valuation of 1/2 portion of 'Shri Durga Jyoti', Indore, adopted by the WTO at Rs. 3,03,800 warranted no interference as the assessee's counsel accepted the valuation, which finding is contrary to documentary evidence, and the CWT (Appeals) holding that no such agreement existed and the entry dated January 15, 1979, in the order-sheet supports the stand of the counsel. Is Rule 1BB applicable or not?' The material facts giving rise to this reference, briefly, are as follows: The assessee is an individual and the ex-ruler of the erstwhile Ratlam State. The assessment year in question is 1974-75. For that assessment year, the assessee filed a return declaring his net wealth at Rs. 3,28,241. The assessee had included in his assets agricultural land, which was acquired by the State Government under the provisions of the Land Acquisition Act, 1894. On acquisition of that land, the Collector had awarded compensation of Rs. 1,48,000, but on October 16, 1966, the District Judge, Ratlam, on a reference under Section 18 of the Land Acquisition Act, 1894, enhanced the compensation to Rs. 17,85,396. On appeal by the State, the High Court, by its judgment dated April 26, 1977, determined the amount of compensation at Rs. 11,11,590 and the amount of solatium at Rs. 1,66,738. The High Court further held that the assessee would be entitled to interest at the rate of 6% per annum on the total amount of compensation from the date of delivery of possession till realisation. Leave to appeal submitted by the State before the Supreme Court was rejected. While framing assessment under the Act, the WTO held that the assets represented by the value of the compensation belonged to the assessee on the relevant valuation date and that it never really ceased to be his asset. After adding interest accrued to the appellant and giving a reduction for the actual payment received byhim earlier, the WTO determined the value of this asset at Rs. 16,90,786 and included it in the net wealth accordingly. As regards valuation of 'Durga Jyoti' palace, another immovable property of the assessee, the WTO held that the authorised representative of the assessee had accepted the valuation of the Valuation Cell, which was Rs. 3,03,800. Aggrieved by the order passed by the WTO, the assessee preferred an appeal. The Commissioner (Appeals) upheld the contention of the assessee that he had not accepted the valuation of 'Durga Jyoti' palace. He accordingly fixed its value at Rs. 2,63,000. The learned Commissioner also deleted the addition of Rs. 16,90,786 made by the WTO, being the value of the right of the assessee to receive compensation in respect of the land acquired by the State Government. Aggrieved by the order passed by the Commissioner (Appeals), the Department preferred an appeal before the Tribunal. The assessee also filed cross-objections. The Tribunal held that as regards the valuation of immovable property, the WTO and the Commissioner had failed to apply Rule 1BB of the W.T. Rules. The Tribunal, therefore, set aside the orders passed by those authorities and remanded the matter to the WTO with the direction that he should first consider the applicability of the provisions of Rule 1BB of the W.T. Rules and then decide the matter according to law. Regarding addition of enhanced compensation to the net wealth of the assessee, the Tribunal observed as follows : 'So far as the addition of the enhanced compensation to the net wealth of the assessee is concerned, we have noted that the possession of this land was taken by the Government on February 26, 1965, and the date of valuation in this case is March 31, 1974. So far as the taxability of the right to receive the enhanced compensation is concerned, their Lordships of the Supreme Court in the case of Pandit Lakshmi Kantjha v. CWT : [1973]90ITR97(SC) , have already decided the issue holding that the right to receive compensation, even though the date of payment is deferred, is property and constitutes an asset for the purpose of the W.T. Act, 1957, The same view has been affirmed in another decision of the Supreme Court in Khorshed Shapoor Chenai v. Asst. CED : [1980]122ITR21(SC) , wherein it has been held that the lands, which are compulsorily acquired by the Government during the lifetime of the deceased, cannot form part of his estate but the right to receive compensation therefor at market value on the date of the notification for acquisition, which would accrue to the deceased, would be property that would pass on his death. Thus, in the light of the above ratio decided by their Lordships of the Supreme Court, the other authorities cited on behalf of the assessee as reported in Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) ; CIT v. Chunilal V. Metha and Sons P. Ltd. : [1971]82ITR54(SC) ; Smt.Manyam Menakshamma v. CWT : [1967]63ITR534(AP) ; CIT v. His Highness Maharaja Yashwant Rao Pawar : [1981]127ITR650(MP) and CWT v. Amatul Kareem : [1981]127ITR549(AP) , will not be applicable and as such, following the same, we hold that the CIT (Appeals) was not justified in excluding the enhanced compensation from the net wealth of the assessee.'.

Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions of law have been referred to this court for its opinion.

2. Now, as regards question No. 1, the matter, in our opinion, is concluded by the decision of the Supreme Court in Pandit Lakshmi Kant Jha v. CWT : [1973]90ITR97(SC) , In that case, it has been held by the Supreme Court that the right to receive compensation from the State is a valuable right, more so when it is based upon statute and even though the date of payment is deferred, the right to receive compensation is property and constitutes an asset for the purpose of the W.T. Act. In view of this decision, our answer to question No. 1 referred to this court by the Tribunal is in the affirmative and against the assessee.

3. Regarding question No. 2, that question does not bring out the real issue between the parties. We, therefore, reframe that question as follows:

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the right to receive compensation was an asset of the assessee on March 31, 1974, even though the compensation was finally determined by the High Court on April 26, 1977 ?'

It has been held by the Supreme Court in Pandit Lakshmi Kant Jha's case : [1973]90ITR97(SC) , that the right to receive compensation becomes vested in an assessee the moment he is divested of his estate. As the assessee in the instant case was divested of the land in question on the date of acquisition, i.e., February 26, 1965, the Appellate Tribunal was justified in holding that the right to receive compensation was an asset of the assessee on March 31, 1974, even though compensation was finally determined by the High Court on April 26, 1977. Our answer to the question reframed is in the affirmative and against the assessee.

4. As regards question No. 3, the matter is concluded by the decision of the Supreme Court in Khorshed Shapoor Chenai v. Asst. CED : [1980]122ITR21(SC) . In that case, it has been held by the Supreme Court that in cases of acquisition of land, where the matter is referred to a civil court, the civil court's evaluation of that right to receive compensation done subsequently would not be its valuation as at the relevant date under the W.T. Act and that it would be the duty of the assessing authority under the Act to evaluate that property (right to receive compensation at marketvalue on the date of relevant notification) as on the relevant date. In this case, the assessing authority had not evaluated the right of the assessee as on the relevant date, i.e., March 31, 1974. The Tribunal, therefore, was not justified in confirming the market value of the property as on March 31, 1974, at Rs. 11,91,047 as determined by the WTO. As already observed, the assessing authority has to evaluate that property in the light of the decision of the Supreme Court in Khorshed's case : [1980]122ITR21(SC) . Our answer to question No. 3, therefore, is in the negative and in favour of the assessee.

5. As regards question No. 4, that question, in our opinion, does not really arise out of the order passed by the Tribunal. The Tribunal has not set aside the finding of the Commissioner (Appeals) that the authorised representative of the assessee had not accepted the valuation of 'Durga Jyoti' palace at Rs. 3,03,800. The Tribunal has remanded the case to the WTO for considering the applicability of the provisions of Rule 1BB of the W.T. Rules to the immovable property included in the net wealth of the assessee. The immovable property of the assessee will also include 'Durga Jyoti' palace of the assessee. The question of applicability of the aforesaid rule was not considered by the Tribunal. Hence, question No. 4 framed by the Tribunal does not arise out of the order passed by the Tribunal and we, therefore, decline to answer that question.

6. Reference answered accordingly. Parties to bear their own costs of this reference.


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