2001 (8) TMI 29 - HC - Income Tax

Court affirms deletion of sum from net wealth for multiple years. Future compensation taxable upon receipt.

Commissioner of Wealth Tax Versus Hari Shankar Rastogi

Commissioner of Wealth Tax Versus Hari Shankar Rastogi - [2002] 254 ITR 80, 170 CTR 290, 119 TAXMANN 699 Issues:1. Whether the Tribunal was justified in upholding the deletion of a sum included in the net wealth of the assessee for multiple assessment years.2. Whether the right to compensation was considered an asset.3. Whether the Tribunal was correct in holding that received compensation would be assessable in the hands of the recipient.Issue 1:The judgment pertains to a dispute regarding the inclusion of a sum of Rs.84,000 in the net wealth of the assessee for the assessment years 1967-68 to 1974-75. The Wealth-tax Officer added this amount as the value of a plot of land owned by the assessee's late father, which was acquired by the Government. The Appellate Assistant Commissioner deleted this addition, stating that only the compensation received should be considered, not the value of the plot. The Tribunal upheld this decision, noting that the assessee only had the right to appeal for higher compensation, which was non-taxable. The Tribunal ruled that any additional compensation received in the future would be taxable in the hands of the recipient. The court affirmed this decision, stating that the right to receive compensation is an asset for wealth tax purposes, and future compensation would be taxable when received.Issue 2:The first issue addressed whether the right to compensation was considered an asset for wealth tax purposes. The court cited previous cases to establish that the right to receive compensation is indeed an asset, regardless of when the compensation amount is determined or paid. The court emphasized that the value of the right to receive compensation should be based on the present value, not the total amount payable in the future. It was clarified that the present value of future compensation must be determined considering all relevant factors before the competent authority.Issue 3:The second issue focused on whether the Tribunal's decision that received compensation would be taxable in the hands of the recipient was correct. The court agreed with the Tribunal, stating that any further compensation received would be subject to taxation. The court highlighted the importance of determining the exact amount of compensation received and assessing it in accordance with the law. Therefore, the court affirmed that any compensation received in the future would be considered taxable and subject to appropriate taxation procedures.This comprehensive analysis of the judgment addresses the issues involved, the factual background, the legal principles applied, and the final decision rendered by the court.