1983 (3) TMI 70 - AT - Wealth-tax

Inclusion of Damages in Net Wealth Despite Appeal; Market Value, Wealth Tax Assessments Adjusted

The Tribunal determined that damages and solatium should be included in the assessee's net wealth despite pending appeal, with the right accruing upon the ... Right to receive compensation - right to receive damages/solatium - asset for Wealth-tax purposes - relation back to date of notification under the Land Acquisition Act - application of section 23(2) of the Land Acquisition Act - valuation date - inclusion in net wealth - fiat of the Court - actionable claim - sub judiceRight to receive damages/solatium - asset for Wealth-tax purposes - relation back to date of notification under the Land Acquisition Act - valuation date - fiat of the Court - actionable claim - Whether the amounts awarded as damages for the unacquired portion and solatium are includible in the assessee's net wealth and the date on which the right to receive them accrued for wealth-tax purposes - HELD THAT: - The Tribunal held that the right to receive damages and solatium awarded under the judicial process in the acquisition proceedings is a valuable right and, for wealth-tax purposes, must be treated as an asset. Relying on the statutory scheme reflected in section 23 and authoritative precedent, the Tribunal concluded that such rights relate back to the date of notification under the Land Acquisition Act and are therefore capable of valuation on the relevant valuation dates. The Tribunal rejected the submission that awards of damages or solatium are mere fiat of the Court or mere actionable claims lacking asset character where the State contests the award: if the higher judicial authority takes into account losses to unacquired land under the statutory criteria, the award is not a mere fiat and the right to receive the amounts is vested and has a market value on each valuation date. Consequently, the existence of a pending appeal to the Supreme Court does not automatically negate the asset character of such rights; their quantification may be in dispute, but the right itself accrued as at the date of notification and had value on the valuation dates. [Paras 11, 12]The right to receive the damages and solatium accrued on the date of the notification under the Land Acquisition Act and such rights are assets includible in net wealth; they have value on the relevant valuation dates.Inclusion in net wealth - valuation - modification of assessments - Whether the assessments should be modified immediately or remitted for inclusion of the amounts finally determined by the Supreme Court - HELD THAT: - Although the Tribunal found that the right to receive damages and solatium is an asset relating back to the notification date and having value on valuation dates, the precise quantum remained subject to the pending appeal before the Supreme Court. In the exercise of a just and practical remedy the Tribunal directed restoration to the file of the Wealth-Tax Officer so that the amounts of damages and solatium as finally determined by the Supreme Court may be included and the assessments modified accordingly. The Tribunal thus ordered inclusion only to the extent finally determined by the highest court, leaving computation and consequential assessment adjustments to the assessing authority. [Paras 12, 14]The matter is remitted to the Wealth-Tax Officer to include the amounts of damages and solatium as are finally determined by the Hon'ble Supreme Court and to modify the assessments accordingly.Final Conclusion: All appeals are allowed for statistical purposes; the Tribunal held that the right to receive the damages and solatium accrued as at the date of the notification under the Land Acquisition Act and is an asset includible in net wealth on the valuation dates, and remitted the matter to the Wealth-Tax Officer to include the amounts as finally determined by the Hon'ble Supreme Court and to modify the assessments accordingly. Issues Involved:1. Inclusion of damages and solatium in the net wealth of the assessee.2. Date on which the right to receive damages and solatium accrued.3. Market value of the right to receive damages and solatium pending appeal before the Supreme Court.Detailed Analysis:1. Inclusion of Damages and Solatium in the Net Wealth of the Assessee:The central issue in these appeals is whether the damages awarded by the Civil Judge for injuries to the property not acquired under the Land Acquisition Act, 1894, and the solatium granted by the High Court under Section 23(2) of the Land Acquisition Act, should be included in the net wealth of the assessee.The Wealth Tax Officer (WTO) included these amounts in the net wealth, reasoning that until the High Court's order is reversed, these amounts are assets of the assessee. The assessee contended that since the right to receive damages/solatium was unsettled due to the pending appeal in the Supreme Court, these amounts could not form part of the net wealth.The Appellate Assistant Commissioner (AAC) accepted the assessee's contentions, distinguishing the case from Pandit Lakshmi Kant Jha v. CWT [1973] 90 ITR 97, where the right to receive compensation was not in dispute. The AAC ruled that since the right to receive damages and solatium was in jeopardy due to the pending appeal, these amounts should not be included in the net wealth.2. Date on Which the Right to Receive Damages and Solatium Accrued:The Tribunal had to determine the date on which the right to receive damages and solatium accrued to the assessee. The Tribunal referred to the decision in CWT v. Smt. Preetilata Devi [1980] 123 ITR 382, where the additional compensation awarded by the Civil Judge was included in the net wealth from the date the notification was issued under Section 4 of the Land Acquisition Act.The Tribunal concluded that the right to receive damages and solatium accrued on the date the notification under Section 4 was issued, not on the dates when the Civil Judge or the High Court awarded these amounts.3. Market Value of the Right to Receive Damages and Solatium Pending Appeal Before the Supreme Court:The Tribunal also considered whether the right to receive damages and solatium had any market value given the pending appeal before the Supreme Court. The Tribunal referred to the Supreme Court's decision in Pandit Lakshmi Kant Jha's case, which held that the right to receive compensation is a valuable right and constitutes an asset for wealth-tax purposes, even if the compensation amount is not immediately payable.The Tribunal rejected the assessee's argument that the pending appeal rendered the right to receive damages and solatium valueless. The Tribunal held that the right to receive these amounts had a market value on each of the relevant valuation dates.Conclusion:The Tribunal concluded that the right to receive damages and solatium accrued on the date of the notification under Section 4 of the Land Acquisition Act and had a market value despite the pending appeal. The Tribunal directed the WTO to include the amounts of damages and solatium as finally determined by the Supreme Court in the net wealth of the assessee and modify the assessments accordingly. All the appeals were allowed for statistical purposes.