Estate duty valuation of acquisition compensation must reflect market value, enhancement prospects, and litigation contingencies.

For estate duty purposes, the deceased's right to receive compensation for land compulsorily acquired before death was property passing on death and had to be valued under the open-market test in section 36 of the Estate Duty Act, 1953, as at the date of death. The Collector's award was only a relevant starting point, not the conclusive value, because the prospect of enhancement, litigation risk, delay, costs, uncertainty, and the possible effect of the protected tenants' share were all material to market value. The later civil court award could not be treated as the sole basis of valuation. The right therefore had to be revalued taking all contingencies into account.

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Issues: Whether, for estate duty purposes, the value of the deceased's right to receive compensation for land compulsorily acquired before death could be fixed at the amount awarded by the acquisition authorities or whether it had to be valued at a higher figure taking into account the possibility of enhanced compensation and the surrounding litigation hazards.

Analysis: The land had vested in the Government before the deceased's death, so what passed on death was not the land itself but the right to receive compensation. That right was property passing on death and had to be valued under the open-market test in section 36 of the Estate Duty Act, 1953, as at the date of death. The amount awarded by the Collector was a relevant and safe starting point, but it was not conclusive, because the claimant's right to seek enhancement, the likelihood of success, the delay involved, the expenditure and uncertainty of litigation, and the possibility of a reduced entitlement by reason of the protected tenants' share were all material circumstances affecting market value. The final compensation eventually awarded by the civil court also could not be treated as the sole or automatic basis of valuation.

Conclusion: The right to receive compensation could not be valued merely at Rs. 22,204 or at the final award alone; the valuation had to be redetermined by taking into account the potential for enhanced compensation and all relevant contingencies. The answer was in favour of the Revenue and against the assessee.

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