1. These appeals preferred by the assessee relate to the assessment years 1967-68 to 1973-74 inclusive. The point in dispute is confined to the valuation of the right to receive compensation in respect of certain agricultural lands. The three items of property in respect of which the aforesaid issue has arisen are: (i) 44 acres 11 guntas of land in Survey Nos. 225, 226 and 227 at Cherlapalli village in respect of which notification of acquisition was issued on 17-11-1966 and possession taken by the Government on 13-3-1967.
(ii) 33 acres 7 guntas of land in Survey Nos. 223 and 224 at Cherlapalli village in respect of which the date of notification and the date of taking over possession were the same as in item (i).
(iii) 8 acres 14 guntas of land in Survey No. 198 in which the assessee had only a half share in respect of which the date of notification was the same as in item (i) but possession was assumed on 9-1-1967.
In respect of the aforesaid items the assessee returned different values but in essence claimed large discounts for hazards of litigation, delay in securing compensation, etc., and pleaded for only much lower values being taken than what were finally awarded or even returned. The WTO broadly took the view that finally awarded compensation, interest and solatium thereon should be the true index.
2. The assessee appealed to the AAC who stated that the Land Acquisition Officer (LAO) awarded compensation on 21-9-1970 at Rs. 2,000 per acre and the Additional Chief Judge on a petition for enhancement decided the issue on 27-9-1973 awarding Rs. 2 per sq. yd.
There was also a mention in the order of the AAC that certain persons filed a suit claiming that they were protected tenants of part of land in Survey Nos. 223 and 224, i.e., item (ii) aforesaid. The assessee, it would appear as ascertained by us, had contended that there were protected tenants only in respect of 2 acres 10 guntas out of the total area of 33 acres 7 guntas and the assessee's claim was upheld by the Additional Chief Judge on 19-4-1975 as referred to by the AAC. However, the tenants who claimed protected tenancy in respect of about 30 acres took the matter up to the High Court but eventually reached a compromise according to which, the protected tenants were to be paid Rs. 1,35,000 out of the compensation which the assessee was to receive.
This compromise was arrived at on 13-11-1977.
3. The assessee stressed before the AAC that considerable risk was involved, that the presence of protected tenants made the litigation more complicated and that in many cases the Hyderabad Benches of the Tribunal had decided that the fair market value of the right to receive compensation must be something between 20 per cent and 50 per cent of the compensation ultimately awarded.
4. The AAC held that having regard to the facts and circumstances of the case and keeping in mind the time-lag, estimates of fair market value were to be made adopting the following criteria: (i) Compensation for lands in which no litigation of protected tenancy was involved: Compensation awarded by the Land Acquisition Officer plus 50 per cent of the enhancement in compensation by the Additional Judge of City Civil Court.
(ii) Compensation for lands in which litigation of protected tenancy is involved. It appears that not all the property is involved but only certain percentage of the total area of the land and in Survey Nos. 223 and 224. The WTO should ascertain this first. He should estimate the fair market value of the appellant's right to receive compensation as follows: 20 per cent of the compensation including the compensation awarded by the LAO for that part of the land which was a subject-matter of litigation between the appellant and the protected tenants. The remainder should be evaluated as in (i).
5. The submission of the learned counsel in the appeals before us was that the award by the LAO having been given only on 21-9-1970 which date fell after 31-3-1970, i.e., the valuation date relevant to the assessment year 1970-71, the assessment years 1967-68 to 1970-71 in the present case were those relating to a period prior to the award by the LAO. Therefore, the submission was that for these years if the value of the right to receive compensation was to be taken, it had to be fixed only with reference to the value which the LAO awarded and not with reference to any subsequent enhancement, etc.
6. The next contention put forth was that in the assessment years 1971-72, 1972-73 and 1973-74, matters were pending before the civil court which gave its decision only on 27-9-1973 and here again the value of compensation receivable should be heavily discounted.
7. In particular the learned counsel submitted that in respect of the second item, there was litigation regarding the extent of area which was under protected tenancy and in respect of this litigation also, a further discount should be given. It was stated that the discount allowed by the AAC was totally inadequate.
8. He then relied on certain judicial pronouncements. He referred to the decision of the Andhra Pradesh High Court in CWT v. G.M. Omar Khan- 127 ITR 543. This was a case of acquisition under the Requisitioning and Acquisition of Immovable Property Act, 1952 ('the RAIP Act') and certain compensation was determined by the Collector.
But, however, the compensation paid was only Rs. 14,05,536 against the compensation of Rs. 21,08,304 determined by the Collector. There was an arbitration proceeding pending. It was stated that though the assessee in that case had made a claim for about Rs. 1,33,24,475, the High Court held that it would be in order to take the value of the compensation received as well as receivable at Rs. 14,05,536 for both the assessment years 1970-71 and 1971-72, which were involved. The amount of Rs. 14,05,536, it was stated, was paid on 2-4-1970 which was subsequent to the valuation date relevant for the assessment year 1970-71 and yet this value was considered to be in order for both the assessment years.
The learned counsel stated that he was relying on this case for the principle that the right to receive compensation was calculated only with reference to the award made in the first instance by the LAO in respect of such valuation dates as fell prior to the award by the LAO himself. He also stated that this case could be construed as authority for the proposition that even after the award the same value can be repeated even if there were claims pending for higher compensation.
9. Another case on which reliance was placed was the decision of the Andhra Pradesh High Court in CWT v. Amatul Kareem  127 ITR 549.
There land belonging to the assessee was acquired by the Government on 25-8-1960 under the Land Acquisition Act, 1894, and by order dated 19-4-1961 the Government awarded compensation of Rs. 2,74,454 by which was later enhanced by a decree of the civil court on 15-4-1967 to Rs. 4,09,300. The appeal by the State was dismissed by the High Court on 18-12-1970. The Tribunal held that for the assessment years 1960-61, 1961-62 and 1962-63, 50 per cent of the amount awarded by the Special Deputy Collector could be taken and for the assessment years 1963-64 to 1970-71, 50 per cent of the entire compensation amount plus 50 per cent of the interest accrued thereon could be included. This view of the Tribunal was, it was stated, affirmed by the High Court and this was again authority for the proposition that till the date of award the right to receive compensation had to be fixed only at a percentage of the award and no more.
10. Another aspect urged by the learned counsel was that solatium does not form part of the market value and, hence, in fixing a percentage with reference to the amounts awarded, solatium should be excluded. In respect of interest awarded, it was stated that the same should be totally excluded since the award of interest was solely in the discretion of the Court.
11. The learned counsel for the assessee also relied on certain decisions of the Tribunal such as those in WT Appeal Nos. 625 to 632 (Hyd.) of 1976-77 dated 24-9-1977 and WT Appeal Nos. 11 to 16 (Hyd.) of 1979 dated 27-6-1980 to state that the Tribunal had fixed a percentage of 25 per cent of the right to receive enhanced compensation in the first case as being in order and 20 per cent of the right to receive compensation in the second case as being in order.
12. Another point highlighted by the learned counsel for the assessee was that in evaluating the market value, due regard should be had to the general principle as to what money, if invested for the particular number of years which it took between acquisition of the property and awarding of compensation, would yield the amount of compensation after the specified period. This amount, he submitted, would have to be discounted further for the hazards of litigations, disputes regarding title to the property, etc.
13. The learned departmental representative, on the other hand, submitted that the basis evolved by the AAC in the present case was eminently reasonable. He also referred to different decisions of the Tribunal where a somewhat similar percentage, i.e., 50 per cent was considered to be in order by the Tribunal. One such case was that in WT Appeal Nos. 523 to 532 (Hyd.) of 1980, dated 26-9-1981.
14. The learned departmental representative also submitted that the contention of the assessee that for years prior to the award by the LAO only a percentage of the value awarded by the LAO should be adopted was not acceptable. He submitted that a buyer on a particular valuation date prior to the award of the LAO would not have been aware of the value on that date and, therefore, the proposition that an evaluation should be made with reference to such value alone on the valuation dates which fell prior to the award could not be accepted.
15. We have considered the rival submissions. We have certain decisions of the Andhra Pradesh High Court which have dealt with the aspect of valuation all of which have been reported in volume 127 of Income-tax Reports. The cases which are relevant are CED v. Estate of late Mohd.
Sultan  127 ITR 277, G.M. Omar Khan's case (supra) and Amatul Kareem's case (supra).
16. In the case of Estate of late Mohd. Sultan (supra), the Tribunal had determined the value of compensation at Rs. 22,204 which was awarded, but their Lordships of the Andhra Pradesh High Court pointed out as under: ... The Appellate Tribunal while determining the principal value of the estate under Section 36 at Rs. 22,204 has not taken into account the fact that the right to receive enhanced compensation though not at the rate at which it is claimed but at least at some higher amount than what is actually now awarded on reference by the civil court, has to be taken into account and that has been ignored. There is no dispute that the land being in the possession of protected tenants they are entitled to 60 per cent of the compensation that is awarded or that may be found awardable in future and only 40 per cent thereof is payable to the accountable persons. That would undoubtedly have to be taken into account along with other factors referred to above. The determination of the right to receive compensation for the land put at Rs. 22,204, in the circumstances of the case, has to be revised having regard to the several factors refe'rred to above. These factors have to be taken into consideration while determining the enhanced compensation payable to the accountable persons and on that basis the principal value of the property that has passed to the accountable persons determined....
(p. 287) These observations show that the claim which an assessee may make to receive enhanced compensation is also something which cannot be ignored just like the dispute relating to land which is in the possession of protected tenants. It was in such circumstances that the matter was restored to the Tribunal for fresh decision.
17. Coming to the case of G.M. Omar Khan (supra) we have to point out that it was a case where the Government had not accepted the compensation amount and what is more, there was a rival claim lodged by another person claiming a share in the entire compensation amount. The Government appointed an arbitrator for adjudicating the dispute between the assessee and the other claimant. The Hon'ble High Court noticed in the course of the judgment that there was a prospect of the amount awarded by the Collector being reduced. This was possible in respect of acquisition proceedings under the RAIP Act as against proceedings under the Land Acquisition Act. It was in view of the special features mentioned that their Lordships came to the conclusion that a higher value than what was received with reference to the award of the Collector cannot be included. A very specific fact which emerged in this case was that the right to receive compensation by the assessee was disputed by another person in its entirety.
18. In deciding the case of G.M. Omar Khan (supra) their Lordships referred to the pronouncement of the Supreme Court in Mrs. Khorshed Shapoor Chenai v. ACED  122 ITR 21 and the principle laid down therein and their own observations following the said observations of the Supreme Court which they had stated in The Estate of Mohd. Sultan (supra). Their Lordships observed in this regard: ... Following the judgment of Supreme Court in the matter of determining the value of the right to receive higher compensation in R.C. No. 182 of 1976, this court by judgment dated December 26, 1979 [CED v. Estate of Late Mohd. Sultan  127 ITR 277], to which both of us were parties held that while the amount awarded by the Collector is a safe index for determining the value of the right to receive the compensation and such value can never be less than the said amount, that is not final, nor is the claim of the estate-holder, or his legal heirs for enhanced compensation final.
Neither the ultimate compensation that is awarded by the final Court of appeal, nor the compensation determined by the Court subsequent to the death of the deceased estate-holder, could be deemed as final for the purpose of arriving at the principal value of the estate under Section 36. These are all relevant factors which are to be taken into account for determining the value of the right to receive compensation which alone forms part of the estate. In a given case not merely the amount of compensation but even the right to receive compensation may be in dispute. That again is a factor to be taken into account. For litigating with a view to earn the enhanced compensation, the time spent and the expenditure likely to be incurred, are all factors which would weigh with any person if the right to receive compensation were to be put in the market for sale on the date of death. Hence, those factors are also relevant even for the purpose of determining the value of the wealth of the assessee for the purpose of assessing the wealth-tax.... (p. 548) 19. Coming to the case of Amatul Kareem (supra), the same propositions were reiterated by their Lordships who made a reference to the earlier two decisions of the Andhra Pradesh High Court in the cases of Estate of Mohd. Sultan and G.M. Omar Khan (supra).
20. An argument was placed before the Andhra Pradesh High Court on behalf of the revenue having regard to the decision of the Supreme Court in Pandit Lakshmi Kant Jha v. CWT  90 ITR 97 that a percentage even higher than 50 per cent should be taken for the right to receive compensation because in respect of Zamindari Abolition Bonds, the right to receive compensation taken by the Tribunal at 65 per cent in the case of Pandit Lakshmi Kant Jha's case (supra) had been upheld by the Supreme Court. Their Lordships of the Andhra Pradesh High Court have pointed out the difference between obtaining compensation payable under the Bihar Zamindari Abolition Act and under the Land Acquisition Act. The relevant observations in this regard are of Amatul Kareem's case (supra) and read as under: The last contention raised by Mr. Rama Rao, learned counsel for the revenue, is that while in Pandit Lakshmi Kant Jha v. CWT  90 ITR 97, the Supreme Court had determined the net wealth of the assessee at 65 per cent of the compensation payable, in the present case, the net wealth is determined at 50 per cent of the compensation. The determination of the net wealth in such matters cannot be made arbitrarily or on the basis of an invariable formula.
No doubt, in these two cases, as pointed out by the learned counsel, the net wealth has been determined at different percentages of the total amount of the compensation awarded. But the points of difference between these two cases are quite obvious. While the amount of compensation payable under the Bihar Zamindari Abolition Act is an amount which does not vary when calculated according to the principles laid down under that Act and that amount is payable on fixed dates, the amount of compensation to be determined under the provisions of the Land Acquisition Act is the market value of the land which will vary from case to case. That apart, under the provisions of the Land Acquisition Act, even the right to receive the compensation may be disputed and only after the amount is ascertained, it would become payable, whereas under the Bihar Zamindari Abolition Act it is payable every month. Further, the amount payable under the Land Acquisition Act is subject to appeal to the High Court. Even the right to receive the compensation may be disputed. The time taken for the completion of these proceedings may vary from case to case. Hence, no hard and fast rule could be laid down as to what percentage of total amount of compensation should be taken as the proper percentage for determining the net wealth of an assessee in a case where the net wealth comprises of the right to receive the compensation. That must necessarily depend, as observed by the Supreme Court, on a consideration of all the relevant factors and circumstances of the case. (p. 558) 21. This brings us to a circular which was issued by the CBDT--Circular No. 2D(WT), dated 15-5-1964--See Taxmann's Direct Taxes Circulars, Vol.
1, 1980 edn., p. 1029--Where the Board had stated that if bonds had not been issued prior to the valuation date, an attempt should be made to ascertain the probable date by which the bonds are likely to be issued and if it was not possible to ascertain such date, it may be taken that the bonds would be issued within a period of 3 years thereafter and an appropriate discount should be given of certain percentages stipulated earlier where bonds had already been issued. Where bonds had already been issued and were repayable after a period of six years, if the last repayment was to be after 10 years, the market value of the bonds was to be taken at 40 per cent of the face value, if it was 9 years, 45 per cent was to be taken, if it was 8 years, 50 per cent was to be taken and so on and so forth. The exact table is as under: No. of years, after the valuation date, when Percentage of face value of the bond becomes repayable or if payable in bond to be taken. instalments, the last instalment becomes pay-9 years 45 per cent8 years 50 per cent7 years 55 per cent6 years 60 per cent5 years 65 per cent4 years 75 per cent3 years 85 per cent2 years 95 per cent1 year 100 per cent The aforesaid circular, in our view, recognises also the principle that the more delayed the award of compensation, the lower the percentage of the eventual compensation which would have to be taken on a particular valuation date.
22. As far as compensation awarded on acquisition is concerned, what, is to be awarded is the compensation according to the market value on a particular date of acquisition. The initial award is made by the LAO and it is subject to reference under Section 18 of the Land Acquisition Act before the city civil court and thereafter an appeal is provided to the High Court. These are all methods and avenues provided for arriving at the proper value of the compensation and for a dissertation on the subject, the decision in Topandas Kundanmalv. CIT  114 ITR 237 (Guj.) is on the point. In our view, there is no particular merit in the proposition that on a valuation date prior to the date of award by the LAO, only a percentage of the compensation awarded by the LAO can be taken. The compensation awarded by the LAO is only one step in the determination of the true compensation. It is well-known that compensation awarded by the LAO are as a rule contested further by way of reference. The reference invariably seeks for an enhancement. After the enhancement there can be an appeal by the State or the party. The appeal by the State would seek for a reduction whereas the appeal by the party would seek for a reduction whereas the appeal by the party would seek for a further enhancement. All these are methods adopted by the State and the party to arrive at the true figure of compensation.
23. Looking to the aforesaid principles, including orders in WT Appeal Nos. 533 to 595 of 1976-77 dated 30-8-1978 and ED Appeal No. 28 of 30-10-1979, we consider that a proper method in appropriate cases could be adopted in trying to evaluate the market value with reference to a percentage of the compensation that may be finally determined. A willing buyer may well say at a particular stage when even the award of the LAO is not available that he would pay a certain small fixed amount and a percentage of the compensation finally determined. No doubt a finally determined amourt may not be available in all cases but if we make an evaluation with reference to a percentage of the finally determined compensation which in due course will be available and give a direction to the WTO to make appropriate modifications, we do not think we would be in error because we consider that substantial justice may result if such a course is adopted particularly when details are lacking of the claims made at various stages by the assessee as well as the State if they are in appeal, etc., though it may mean keeping the revision of the assessments themselves pending for some time.
24. If we view the present case from the aforesaid angle, we find that notification was made in 1966 and possession was entered in 1967, the award by the LAO came 3 years later in 1970 and the enhancement by the city civil court another 3 years later, i.e., in 1973. Thereafter, in respect of the first and third items of property the matter became final and in respect of the second item of property the disputes between the tenants and the assessee went on for another four years, i.e., up to 1977. We have already set out the percentage of the face value of the bonds to be taken as prescribed by the Board's Circular No. 2-D (WT), dated 15-5-1964 where the last payments are to be made after a certain number of years. So also in the present case the award of 1he city civil court, which became final in two instances, was rendered after a certain number of years from the relevant valuation dates. The earliest of the valuation dates was 31-3-1967. The city civil court gave its judgment regarding enhanced compensation on 27-9-1973 when matters became final, i.e., 6 years later. Therefore, if the formula prescribed by the circular for bonds is taken into consideration, the value to be taken as on 31-3-1967 would be 55 per cent of the finally determined compensation, on 31-3-1968 it would be 60 per cent, on 31-3-1969 65 per cent, on 31-3-1970 75 per cent, on 31-3-1971 85 per cent, on 31-3-1972 95 per cent and on 31-3-1973 100 per cent.
25. As already set out, the High Court of Andhra Pradesh has compared the payment under the Bihar Zamindari Abolition Act as well as under the Land Acquisition Act and highlighted the various imponderables in respect of obtaining compensation under the Land Acquisition Act in the case of Amatul Kareem (supra) of which we have set out the relevant extract earlier. The observations of their Lordships lead to the conclusion that on the same date if an evaluation is to be made of the right to receive compensation under the land acquisition proceedings and of the Zamindari Abolition bonds, the former value would be lower.
This is because under the Land Acquisition Act only after compensation is fixed, the amount becomes payable whereas under the Bihar Zamindari Abolition Act there is a definite compensation payable which can be calculated and is payable every month. Further, under the Land Acquisition Act appeals are provided and even the right to receive compensation may itself be contested. Having regard to all these imponderables, we consider that it would be appropriate to allow a discount of 50 per cent over the values fixed by the circular referred to. In other words, where from a particular valuation date the final compensation is determined, 10 or more years later the value to be taken would be 50 per cent of 40 per cent, i.e., 20 per cent. Where it is fixed 9 years later, it will be 50 per cent of 45 per cent, i.e., 221 per cent, etc. It would, thus, be possible to fix certain broad percentages as a working base from which appropriate variation could be made to suit the requirements of individual cases. In some cases it may be necessary to even embark on a totally different method of computation for, as pointed out by the Hon'ble High Court, the eventual decision in each case would have to be on consideration of all relevant factors and circumstances.
26. While a computation on the basis set out by us would be in order till such time as the LAO gives his award, from the date the LAO gives his award the amount to be taken would be the amount awarded by him plus a percentage of the enhanced compensation which may finally be awarded taking into account the time period from the date of his award to the date of final compensation. This is because the amount payable cannot in any case be lower than that awarded by the LAO in the land acquisition proceedings unlike under the RAIP Act where the Government could contest the initial award.
27. In the present case, therefore, regarding the first and third items, we would direct the values to be recomputed with reference to particular valuation dates in accordance with our aforesaid directions.
28. As far as the second item is concerned, the protected tenants had put in claims against the assessee and it was eventually settled by way of compromise by which the assessee was required to pay out from the compensation received a sum of Rs 1,35,000. We would direct here also that the percentages be taken as aforesaid with reference to the final net compensation which would remain with the assessee after payment of the amount of Rs. 1,35,000 by way of compromise which was settled in 1977 and which for working out the formula with reference to each valuation date may be taken as the final date of decision (13-11-1977).
Since the assessee alone is in appeal and not the revenue, if the value by the aforesaid method in any year exceeds the value in respect of such right to receive compensation as computed in accordance with the directions of the AAC per para 6 (ii), the ceiling will be restricted in each year to that value which results according to the AAC's directions.
29. We have to deal with 2 more contentions. The learned counsel submitted that solatium awarded should not be treated as part of compensation. We are unable to agree to this proposition. Every assessee has a right to receive solatium which is calculated at a percentage of the compensation, for being deprived of the property.
This is clearly an asset and the amount of compensation, as referred to by us earlier, would include the amount of solatium finally awarded 30. Another contention was that the interest awarded should not form part of compensation. Here after hearing the learned departmental representative, we are inclined to agree with the learned counsel for the assessee that the awarding of interest being in the pure discretion of the Court would not be an asset till such time as it is actually awarded by the Court and, therefore, as far as the element of interest is concerned, it would be left out of consideration in determining the right to receive compensation. For this conclusion, we are supported by the view of the Andhra Pradesh High Court in CIT v. Smt. Sankari Mnickyamma  105 ITR 172.