Statutory right to compensation is an asset for wealth-tax, but only its present value counts when payment is deferred.

A statutory right to receive compensation on vesting of land in the State is an asset for wealth-tax purposes and is includible in net wealth, even if the compensation has not yet been quantified or paid. However, where the compensation is deferred and remains unascertained on the valuation date, wealth-tax cannot be levied on the full estimated compensation; only the present value of that right is includible. The valuation must therefore be made on proper principles reflecting the deferred character of payment, and the matter requires fresh valuation on that basis.

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Issues: (i) whether the right to receive compensation for lands vested in the State under the West Bengal Estates Acquisition Act, 1953 constituted an asset includible in net wealth under the Wealth-tax Act, 1957; (ii) whether the amount includible was the full estimated compensation or only the present value of that right as on the valuation dates.

Issue (i): whether the right to receive compensation for lands vested in the State under the West Bengal Estates Acquisition Act, 1953 constituted an asset includible in net wealth under the Wealth-tax Act, 1957

Analysis: The right to receive compensation accrued when the assessee's lands vested in the State. The fact that the compensation had not yet been quantified or paid did not alter the character of that right as property of value. The statutory scheme under the West Bengal Act was held to be materially comparable to the Bihar enactment previously considered, and the earlier ruling that such a statutory right is an asset was applied.

Conclusion: The right to receive compensation was an asset and was includible in the assessee's net wealth.

Issue (ii): whether the amount includible was the full estimated compensation or only the present value of that right as on the valuation dates

Analysis: Where compensation is payable only at a future date and remains to be quantified, the relevant figure for wealth-tax purposes is not the face value of the eventual compensation but the present value of the right as on the valuation date. The valuation therefore had to be made on proper principles taking into account the deferred nature of payment.

Conclusion: Only the present value of the right to receive compensation was includible, and the full estimated compensation could not be brought into the net wealth.

Final Conclusion: The assessee's right to receive compensation was taxable as an asset, but the matter had to go back for fresh valuation of that right on correct principles.

Ratio Decidendi: A statutory right to receive compensation on vesting of property in the State is an asset for wealth-tax purposes, but where payment is deferred and unquantified on the valuation date, only the present value of that right can be included in net wealth.

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