1985 (2) TMI 33 - HC - Income Tax

High Court excludes estimated compensation from deceased's estate value under Estate Duty Act, 1953.

The High Court ruled in favor of the accountable person, holding that the estimated compensation payable by the Government of West Bengal on the ... Estate Duty, Property Passing Issues:1. Interpretation of whether the estimated compensation payable by the Government of West Bengal on acquisition of agricultural land should be included in the principal value of the deceased under the Estate Duty Act, 1953.Detailed Analysis:The case involves a reference under section 64(1) of the E.D. Act, 1953, where the main question of law is whether the Tribunal misdirected itself in law by excluding the estimated compensation of Rs. 25,000 from the principal value of the deceased's estate. The deceased's agricultural land was acquired by the Government of West Bengal, and the compensation amount was estimated by the Assistant Controller of Estate Duty. However, the Appellate Controller excluded this estimated compensation as no compensation roll had been prepared even after ten years of acquisition.Before the Tribunal, the departmental representative argued that the deceased was entitled to compensation, while the accountable person's counsel contended that no compensation roll had been prepared, citing a precedent case. The Tribunal upheld the Appellate Controller's decision based on the precedent case, emphasizing that until the compensation roll is prepared and published, the right to compensation is not a legal right and cannot be considered an asset under the Wealth Tax Act.In the case of CWT v. Mahatab [1970] 78 ITR 214, it was held that until the compensation assessment roll is finalized and published, the right to compensation does not constitute an asset under the Wealth Tax Act. The Supreme Court in subsequent cases reiterated that the right to receive compensation is an asset, but only when it is a legally enforceable right, not merely a hypothetical or inchoate claim.The Revenue contended that the decision in Mahatab was impliedly overruled by subsequent Supreme Court judgments, arguing that the right to receive compensation should be deemed property passing on the deceased's death. However, the High Court disagreed, noting that the Supreme Court did not express any opinion on the correctness of the Mahatab decision and upheld the Tribunal's decision to follow Mahatab.In conclusion, the High Court answered the reference question in the negative, in favor of the accountable person. The Court also certified the case as fit for appeal to the Supreme Court under section 65 of the E.D. Act, 1953, due to the substantial question of law regarding the inclusion of the right to receive compensation in the deceased's estate value under the Estate Duty Act, 1953.