Statutory right to compensation counts as an asset under wealth tax even before quantification, court holds.

A statutory right to receive compensation under the Karnataka Land Reforms Act, 1961 was treated as property and therefore an asset under section 2(e) of the Wealth-tax Act, 1957, even though the compensation had not yet been quantified on the valuation date. The Court held that vesting of the lands in the State created an enforceable entitlement to compensation governed by a statutory formula, and delay in determination or payment did not make the right contingent or inchoate. The receivable was thus includible as an asset, subject to valuation principles such as discounting for tax purposes.

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Issues: Whether the compensation receivable under the Karnataka Land Reforms Act, 1961, though not yet determined or quantified on the valuation date, constituted an asset within the meaning of section 2(e) of the Wealth-tax Act, 1957.

Analysis: On vesting of the lands in the State, the owner became entitled to compensation under the Karnataka Land Reforms Act, 1961. The amount payable was governed by a statutory formula, and the delay in determination or payment did not destroy the underlying right. The Court distinguished cases where the claim to compensation was vague, contingent, or merely inchoate, and relied on the principle that a statutory right to receive compensation is itself property and therefore an asset, even if its present value requires discounting for tax purposes.

Conclusion: The right to receive compensation was an asset under section 2(e) of the Wealth-tax Act, 1957, and the question was answered in the affirmative against the assessee.

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