Open market valuation of compensation rights may include litigation risk, uncertainty and delay when fixing death-date value.

In valuing a deceased person's right to receive compensation for acquired land, the open market value as on the date of death is the governing basis. The amount ultimately payable is not conclusive, because marketability, uncertainty of recovery, delay in finalisation of the award, and the possibility of litigation are relevant factors. Litigation risk may therefore justify a further discount after applying valuation principles, and no rigid percentage or hard and fast rule applies. On the facts described, the Tribunal's additional discount for risk was upheld and the valuation was accepted in favour of the assessee.

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Issues: Whether, in valuing the right to receive compensation for acquired land as on the date of death of the deceased, a further discount could be made by introducing the theory of risk or hazard of litigation after applying Parks' principles of valuation.

Analysis: The value of the deceased's property had to be estimated as on the date of death on the basis of what it would fetch in the open market. In the case of a right to receive compensation, the amount finally payable is not by itself conclusive, and the surrounding circumstances, including the marketability of the right, the uncertainty of the compensation amount, the delay in finalisation of the award, and the possibility of litigation, are relevant factors. The guiding principle is that the risk or hazard of litigation is a factor to be taken into account in fixing the value, and there is no hard and fast rule for determining such value. On the facts, the Tribunal had already applied Parks' formula to the ultimate compensation and then made a further discount to reflect the risks and delays inherent in the claim.

Conclusion: The further discount for risk was justified and the valuation adopted by the Tribunal was upheld. The question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: In valuing a deceased's right to receive compensation, the assessing authority must consider the open market value as on the date of death and may account for litigation risk, uncertainty of recovery, and delay in finalisation; no rigid percentage rule applies.

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