Estate duty treatment of compensation rights: only an enforceable right to net compensation is property, valued at market price on death.

A verified claim under the Displaced Persons (Claims) Act, 1950, and the bare statutory right to apply for compensation under section 4 of the 1954 Act are not property for estate duty, because they do not create an existing proprietary interest and are no more than a right to seek determination. The right to receive net compensation determined under section 7(3) of the 1954 Act is property, since it is a heritable and transferable statutory entitlement capable of monetisation and may pass on death under the Estate Duty Act. For valuation under section 36, the right must be assessed at its open-market price on the date of death, not automatically at a later quantified amount.

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Issues: (i) Whether a verified claim under the Displaced Persons (Claims) Act, 1950, and the bare right to apply for compensation under section 4 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, constitute property for purposes of estate duty; (ii) whether the right to receive net compensation determined under section 7(3) of the 1954 Act is property passing on death under the Estate Duty Act, 1953; and (iii) how such compensation is to be valued under section 36 of the Estate Duty Act, 1953.

Issue (i): Whether a verified claim under the Displaced Persons (Claims) Act, 1950, and the bare right to apply for compensation under section 4 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, constitute property for purposes of estate duty

Analysis: A verified claim under the 1950 Act only records and verifies the claimant's assertion regarding property left in West Pakistan and does not itself create any proprietary interest in compensation. Section 4 of the 1954 Act confers only the right to make an application for compensation, which is no more than a right to sue and not an existing proprietary interest. The right becomes enforceable only within the statutory scheme after further determination under the Act.

Conclusion: No. A verified claim under the 1950 Act and the bare statutory right to apply for compensation under section 4 of the 1954 Act are not property for estate duty purposes.

Issue (ii): Whether the right to receive net compensation determined under section 7(3) of the 1954 Act is property passing on death under the Estate Duty Act, 1953

Analysis: The Estate Duty Act uses an inclusive concept of property, and the expression extends to interests that are heritable, transferable, and capable of being reduced to money value. Under the 1954 Act, the right to compensation is a statutory entitlement vested in a verified claimant. The net amount becomes determinable under section 7(3), and that right is neither illusory nor defeasible in the manner of a mere hope. Even if the quantification is completed after death, the deceased had an existing interest capable of disposal during life, and section 6 of the Estate Duty Act brings such property within the deeming provision of property passing on death.

Conclusion: Yes. The right to receive net compensation under section 7(3) of the 1954 Act is property, and if the net compensation is determined or payable in the statutory sense, it passes on death for estate duty purposes.

Issue (iii): How such compensation is to be valued under section 36 of the Estate Duty Act, 1953

Analysis: Section 36 requires valuation at the price the property would fetch if sold in the open market at the time of death. The taxable subject is not the later quantified amount as such, but the market value of the right as it stood on the date of death. Where the compensation amount had already been substantially determined, the figure may approximate face value; where it had not yet been quantified, the valuation must reflect the market price of the right on the date of death and not a later determined amount.

Conclusion: Compensation is to be valued at its open-market price on the date of death under section 36, not automatically at the later determined amount.

Final Conclusion: The references were answered by holding that only the statutory right to receive net compensation determined under section 7(3) of the 1954 Act is relevant property for estate duty, while a verified claim or bare right to apply is not; valuation must be made on the basis of open-market price at death.

Ratio Decidendi: For estate duty, property includes a heritable and transferable statutory right capable of monetisation, but not a bare right to sue or a verified claim by itself; compensation rights are taxable only when they amount to an enforceable right to net compensation and are valued as marketable rights at the date of death.

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