ORDER
P.M. Jagtap, Accountant Member
1. These appeals filed by the assessee against a consolidated order of learned CWT(A) dated 5/2/2004 for assessment years 1987-88 to 92-93 involve common issues and the same, therefore, are being disposed of by a single order.
2. The relevant facts of the case giving rise to these appeals are that the assessee was a co-owner (1/2 share) of agricultural land in Khasra No. 4681 of Hisar measuring 41 Kanals 4 Marlas i.e. 24926 sq.yards. The said land situated in municipal limits of Hisar was acquired by HUDA under Haryana State Government Notification dated 23/5/83. Actual possession of the said land was taken over by HUDA on 7/5/86 and compensation @ Rs. 48,000/-per acre i.e. Rs. 2,47,200/- was awarded to the assessee and the other co-owner i.e. assessee’s brother. The assessee and his brother challenged the quantum of compensation so awarded to them in an appeal filed before the District Judge, Hisar who vide his order dated 22/9/90 fixed the cost of acquisition of the said land @ Rs. 100/- per sq.yard and accordingly, awarded enhancement compensation alongwith interest thereon. This enhanced compensation was received by the assessee and his brother together with interest on 8/5/91 after furnishing bank guarantee/surety bond. Against the order of the District Judge, Hisar, assessee and his brother as well as the State Government filed appeals before the Hon’ble Punjab & Haryana High Court. The appeal filed by the State Government was dismissed by the High Court whereas the appeal of the assessee was allowed by it awarding cost of acquisition @ Rs. 120/- per sq.yard vide order dated 24/2/94 which resulted in further enhancement of compensation. The decision of Hon’ble Punjab & Haryana High Court was affirmed by the Hon’ble Supreme Court dismissing the appeal filed by the State Government on 22/7/98. Meanwhile, the enhanced compensation awarded by Hon’ble Punjab & Haryana High Court @ Rs. 120/- per sq.yard was received by the assessee on 20/12/95 and the Assessing Officer having reason to believe on the basis of information coming to his possession that the net wealth of the assessee represented by his right to receive the said compensation alongwith interest thereon had escaped assessment due to his failure to file the returns of wealth for assessment years 1987-88 to 92-93, issued notices Under Section 17 which were served on the assessee on 2/1/98. Thereafter, returns of net wealth were filed by the assessee for all the years under consideration stating therein that his net wealth on the relevant valuation dates was below the taxable limit and compensation for land acquisition had not been accrued to him upto the said dates. The Assessing Officer, however, found no merits in the stand taken by the assessee and relying on the cases of Khurshid Shapoor Chiani – 122 ITR 21 (SC), Pt.Laxmi Kant Jha v. CWT 90 ITR 97 (SC), CWT v. Smt. Anjamli Khan – 187 ITR 345 (SC) and CWT v. Pochigolla Narsimha Rao – 134 ITR 640 (AP), he held that the right to receive compensation and enhanced compensation alongwith interest accrued thereon was an ‘asset’ chargeable to wealth tax. Accordingly, he included the following amount receivable by the assessee on the relevant valuation dates in his net wealth for the purpose of wealth tax:-
Assessment Year Compensation/ Accrued Interest 1/2 share of the
Enhanced assessee
Compensation
-------------- ------------ -------------- ----------------
1987-88 4,720,503 305,450 2,512,976
1988-89 4,720,503 645,036 2,682,769
1989-90 4,720,503 984,622 2,852,562
1990-91 4,720,503 1,324,208 3,022,355
1991-92 4,720,503 1,663,794 3,192,148
1992-93 4,720,503 2,003,380 33,61,942
3. Aggrieved by the orders of the Assessing Officer, the assessee preferred appeals for all the years under consideration before the learned CWT(A) who dismissed the same and upheld the orders of the Assessing Officer keeping in view the case laws relied upon by the Assessing Officer in support of his conclusions. Aggrieved by the same, the assessee is in appeal before the Tribunal.
4. Out of the nine grounds raised by the assessee, which are common in all these appeals, the learned counsel for the assessee has not pressed the grounds challenging the validity of assessments completed by the Assessing Officer Under Section 16(3)/17. The same are, therefore, dismissed as not pressed.
5. As regards the other grounds, the learned counsel for the assessee has submitted that the following issues are mainly raised therein for the consideration and decision of the Tribunal:-
(a) Whether the right to receive compensation, which was under challenge on the relevant valuation dates, could be included in the net wealth of the assessee for the purpose of wealth tax?
(b) Whether the right to receive compensation being incapable of being valued as per Section 7(1) read with Schedule III, was includible in the wealth of the assessee?
(c) Whether right to receive interest on the compensation was an asset chargeable to wealth tax?
6. As regards the first issue mentioned in (a) above, the learned counsel for the assessee relied on the decision of Hon’ble Madras High Court in the case of CWT v. A.R. Krishnamurthy reported in 249 ITR 239 as well as the decision of Delhi ‘A’ Bench of ITAT in the case of Shri Devendra Verma (WTA No. 52 to 58/Del/00 dated 24/2/2004) to contend that right to receive compensation which was in dispute on the relevant valuation date and had not finalized till that date could not be said to belong to the assessee so as to be regarded as part of his taxable wealth.
7. The learned counsel for the assessee also submitted that the value of any asset, other than cash, for the purposes of Wealth Tax Act on the valuation date is required to be determined in the manner laid down in Schedule III as per the provisions of Section 7(1). He invited our attention to Schedule III of Wealth Tax Act and submitted the same does not contain any rule prescribing method for valuation of such right. His contention, therefore, was that the right to receive compensation is incapable of valuation as per the provisions of Section 7(1) read with Schedule III and since these machinery provisions fail to value such right, it cannot be included in the net wealth of the assessee.
8. Without prejudice to the aforesaid contentions, the learned counsel for the assessee submitted that interest receivable on compensation, in any case, was not chargeable to Wealth Tax Act as held by Hon’ble Andhra Pradesh High Court in the case of CWT v. Pochigolla Narsimha Rao – 134 ITR 640. He also pointed out that the assessee having actually received the compensation alongwith interest thereon on 8/5/91, the same was no more receivable as on 31/3/92 i.e. the valuation date relevant to assessment year 1992-93 and thus was not includible in assessee’s wealth for that year. He further submitted that the value of other assets was included in the net wealth of the assessee by the Assessing Officer for all the years under consideration on ad-hoc basis and there being nothing brought on record to support the same, it is liable to be deleted.
9. The learned DR, on the other hand, strongly relied on the orders of the authorities below in support of the revenue’s case and submitted that the case laws relied upon by the Assessing Officer may be kept in view while deciding the issues involved in the present appeals preferred by the assessee.
10. We have considered the rival submissions and also perused the relevant material on record. As regards the first issue which arises for our consideration in the present appeal as to whether the right to receive compensation which was under challenge on the relevant valuation dates could be included in the net wealth of the assessee for the purpose of wealth tax, it is observed that in the case of Pandit Laxmi Kant Jha v. CWT 90 ITR 97 (SC), the Hon’ble Supreme Court has held that the definition of ‘assets’ as given in Section 2(e) of Wealth Tax Act, though not exhaustive, shows its wide amplitude and there is no reason as to why the right to receive compensation cannot be included amongst the assets of an assessee. Explaining further, their Lordships of Apex Court observed that the right to receive compensation became vested in the assessee the moment he was divested of his estate and such right is a valuable right since it is based upon Statute and the liability to pay is not denied by the State. Similar view was reiterated by the Hon’ble Apex Court in the case of Khurshid Shapoor Chiani – 122 ITR 21 wherein it was held that the right to receive compensation at market value on the dates of the relevant notifications unquestionably accrued to the deceased which was property and it would be such property that would pass on the death of the deceased. In the case of CWT v. Smt. Anjamli Khan – 187 ITR 345, the Hon’ble Supreme Court had an occasion to consider a similar issue again and while reiterating its earlier view that right to receive compensation for acquisition of land is a valuable asset includible in the net wealth of the assessee, their Lordships further held that by the mere fact that the quantification of compensation or its payment is deterred, the right to receive compensation does not cease to be an asset includible for the purpose of wealth tax. The Hon’ble Apex Court also clarified that where the compensation is to be determined and is payable on a date much later than the valuation date, the value of assessee’s right to receive the compensation can only be the ‘present value’ that may be determined and paid as compensation in future. It appears that the decision of Hon’ble Madras High Court in the case of CWT v. A.R. Krishnamurthy – 249 ITR 239 as well as that of Tribunal in the case of Shri Devendra Verma (supra) cited by the learned counsel for the assessee are not in consonance with the legal position propounded by the Hon’ble Supreme Court in the aforesaid decisions. As such, keeping in view the said decisions of the Hon’ble Apex Court, we hold that the right to receive compensation for acquisition of land was chargeable to wealth tax notwithstanding the fact that quantification of the same was in dispute on the relevant valuation date and the authorities below were fully justified in including the same in the net wealth of the assessee. However, there was no justification in their action in taking the value of such right @ Rs. 120/- per sq.yard as finally determined as a result of Subsequent judgment of Hon’ble Supreme Court delivered on 22/7/98. As held by Hon’ble Supreme Court in the case of CWT v. Smt. Anjamli Khan reported in 187 ITR 345, compensation payable in future has to be valued at the ‘present value’ i.e. the value as on valuation date which cannot be equal to the amount of compensation payable under the Land Acquisition Act and such ‘present value’ of the future compensation will, therefore, have to be determined on a consideration of all relevant aspects that may be put forward before the Tribunal. Having regard to all the facts of the case on hand including the fact that the quantum of compensation amount has been finally decided @ Rs. 120/- per sq.yard on 22/7/98 as a result of Hon’ble Supreme Court affirming the decision of Hon’ble High Court, we are of the view that the present value of enhanced compensation can fairly and reasonably be taken at 60% after allowing a discount of 40% as on all the valuation dates relevant to the years under consideration. Accordingly, we modify the impugned order of learned CIT(A) and direct the Assessing Officer to take the value of assessee’s right to receive compensation at the undisputed amount of compensation originally awarded as increased by 60% of the additional compensation which was in dispute on all the relevant valuation dates but awarded finally on the subsequent date i.e. 22/7/98. Needless to observe that the value so determined will have to be reduced by the amount of compensation actually received by the assessee on or before the respective valuation dates.
11. As regards the second issue raised by the learned counsel for the assessee in the present appeal as to whether the right to receive compensation, which was incapable of being valued as per Section 7(1) read with Schedule III, could be included in the wealth of the assessee, it is observed that in the case of CWT v. Pochigolla Narsimha Rao – 134 ITR 640, the Hon’ble Andhra Pradesh High Court has held that Section 7 merely provides the machinery for the purposes of ascertaining the ‘net wealth’ by valuing the assets composing the wealth and these machinery provisions of Section 7 cannot be so interpreted, except for reasons of legislative use of intractable languages, to exempt certain assets constituting the wealth. Moreover, the amount payable to the assessee towards compensation for acquisition of land was determined by the competent authorities in money terms and even though such compensation was finally determined as a result of judgment of Hon’ble Supreme Court delivered much after the relevant valuation dates, the present value of the same could be determined as held by Hon’ble Supreme Court in the case of CWT v. Smt. Anjamli Khan – 187 ITR 345. We, therefore, find it difficult to accept the contention raised by the learned counsel for the assessee that there being no specific rules contained in Schedule 111 to value the right to receive compensation, the same was not includible in the wealth of the assessee for the purpose of wealth tax.
12. As regards the third issue involved for our consideration in the present appeal as to whether the right to receive interest on the compensation was an asset chargeable to wealth tax, it is observed that in the case of CWT v. Pochigolla Narsimha Rao (supra), the Hon’ble A.P.High Court has held that accrued interest is a ‘property’ as defined in Section 2(e) of the Wealth Tax Act and it is, therefore, liable to be included as an asset for the purpose of computation of the net wealth. This view of Hon’ble A.P.High Court has been affirmed by the Hon’ble Supreme Court in the case of CWT v. Vysyaraju Badrinarayana Moorthy Raju – 152 ITR 454 while holding that interest due to the assessee but not realized was liable to be included in his net wealth on accrual basis. Although in the case of Smt. Rama Bai Etc. v. CIT reported in 181 ITR 400, the Hon’ble Supreme Court has held that interest payable on enhanced compensation awarded under the Land Acquisition Act cannot be taken to have accrued on the date of order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order, it is observed that this decision was rendered in the income tax proceedings and that too in the case of an assessee following mercantile system of accounting. The said analogy, therefore, cannot be extended to wealth tax proceedings wherein only the assets belonging to the assessee on the relevant valuation date are required to be included in his net wealth chargeable to tax irrespective of method of accounting followed by him and since the interest in the present case had become finally payable to the assessee only as a result of Hon’ble Supreme Court judgment delivered on 22/7/98, the same, in our humble opinion, could not be treated as an asset/debt belonging to the assessee on the valuation dates falling before that date. In that view of the matter, we find no justification in the action of authorities below in including such interest in the net wealth of the assessee for the years under consideration and reversing their orders, we decide this issue in favour of the assessee.
13. We are also inclined to agree with the contention of the learned counsel for the assessee that the value of other assets included by the Assessing Officer in the net wealth of the assessee on ad-hoc basis without there being anything on record to support and substantiate the same, was not sustainable. But since the assessee himself had not given any details of his other assets in the wealth tax returns filed for the years under consideration stating merely that his net wealth was below the taxable limit, we direct him to furnish such details before the Assessing Officer who shall accept the same after necessary verification in accordance with law. We also direct the Assessing Officer to take into consideration the other deductions available to the assessee while determining the net wealth chargeable to tax and allow the same in accordance with law. The impugned order of learned CIT(A) on this issue is, therefore, set aside and the matter is restored back to the Assessing Officer to be decided afresh after affording sufficient opportunity to the assessee of being heard.
14. In the result, all the six appeals of the assessee are partly allowed.