Vested right to compensation counts as wealth-tax asset, but valuation must be fixed independently on the valuation date.

A vested right to receive enhanced compensation on compulsory acquisition is property and therefore an asset for wealth-tax purposes, even if the amount is not finally quantified when the land is acquired. The right arises on divestment of the property and exists on the relevant valuation date, so later determination of compensation does not extinguish it. However, the value of that right must be assessed independently as on the valuation date by reference to the market value then prevailing; a later court award cannot itself be adopted as the valuation. The wealth-tax treatment of the right was upheld in principle, but the valuation adopted was set aside for fresh determination.

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Issues: (i) Whether the right to receive enhanced compensation was property and an asset for wealth-tax purposes. (ii) Whether that right was an asset on the relevant valuation date even though compensation was finally determined later. (iii) Whether the valuation adopted for the right to receive compensation as on the valuation date was correct.

Issue (i): Whether the right to receive enhanced compensation was property and an asset for wealth-tax purposes.

Analysis: The right to receive compensation from the State, even though payment is deferred and the amount is not yet finally quantified, is a valuable statutory right. Such a right constitutes property and falls within the concept of an asset under the Wealth-tax Act.

Conclusion: The issue is answered in the affirmative and against the assessee.

Issue (ii): Whether that right was an asset on the relevant valuation date even though compensation was finally determined later.

Analysis: The right to compensation vests when the owner is divested of the property. Once the land stood acquired, the assessee's right to receive compensation existed on the valuation date, and later adjudication of the final amount did not destroy that existing asset.

Conclusion: The issue is answered in the affirmative and against the assessee.

Issue (iii): Whether the valuation adopted for the right to receive compensation as on the valuation date was correct.

Analysis: The subsequent civil court or appellate determination of compensation does not itself furnish the valuation of the right as on the relevant valuation date under the Wealth-tax Act. The assessing authority must value the right independently as on that date by reference to the market value then prevailing.

Conclusion: The issue is answered in the negative and in favour of the assessee.

Final Conclusion: The reference is answered partly for the Revenue and partly for the assessee, with the wealth-tax treatment of the right to compensation upheld in principle but the valuation adopted for that right set aside for fresh determination in accordance with law.

Ratio Decidendi: A vested right to receive compensation on compulsory acquisition is property and an asset for wealth-tax purposes, but its value must be determined independently as on the valuation date and cannot be taken from a later compensation award.

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