Income Tax Appellate Tribunal - CochinCommissioner Of Wealth-Tax vs Mrs. Lucy Kochuvareed on 22 June, 1992Equivalent citations: [1992]43ITD75(COCH)ORDERP.K. Ammini, Judicial Member1. By these reference applications underSection 27(1)of the Wealth-tax Act, 1957, the Commissioner of Wealth-tax, Ernakulam, requests the Tribunal to draw up a statement of the case and refer for the opinion of the Hon'ble High Court of Kerala, the following questions, said to be questions of law, arising out of the order of the Tribunal dated 21-6-1991 passed underSection 27(6)of the Wealth-tax Act, in W.T.A. Nos. 283 to 290 (Coch.)/82 relating to the assessment years 1971-72 to 1978-79 :Common questions in R.A. Nos. 194 to 201 (Coch.)/91 :1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding/directing deduction of a margin of 25% from the total value of the compensation and should not the Tribunal have confined the deduction only from out of the enhanced compensation ?2. Whether, on the facts and in the circumstances of the case, the manner and method of valuing "the market value of the assessee's right to receive compensation" is right in law and fact ?3. Whether, on the facts and in the circumstances of the case, should not the interest awarded be considered as part of consideration and is not the order of the Tribunal on the issue against the decision of the Supreme Court inRama Bai v. CIT[1990] 181 ITR 400. Inaddition, the following two common questions are also taken in R.A. Nos. 194 to 196 (Coch.)/91 relating to assessment years 1971-72 to 1973-74 :1. Whether, on the facts and in the circumstances of the case and for the purpose of determining the right to receive compensation the Tribunal is right in law and fact in taking into consideration only the present value of Rs. 28,74,577 and not Rs. 28,74,577 at its face value plus the present value of enhanced compensation ?2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that initial compensation ("such compensation" in the order refers to both initial and enhanced compensation) was received by the assessee only after a tortuous course of litigation ?2. These questions are stated to arise out of the order of the Tribunal dated 21-6-1991 passed underSection 27(6)of the Wealth-tax Act in obedience to the directions of the Hon'ble High Court of Kerala in ITR Nos. 70 to 87 of 1988. The Hon'ble High Court after referring to the chequered history of the case and also the general principles regarding the valuation of the property aslaid down inseveral decisions of the High Court and Supreme Court and also the principles highlighted by Dixon, J. in Commissioner of Succession Duties v. Executor Trustees & Agency Co. of South Australia Ltd. 74 CLR 358, ultimately held as follows :(a) The market value of the property acquired should be ascertained for the assessment year 1970-71 as the assessee was the owner of the property;(b) For and from the assessment year 1971-72, the assessee had only the right to receive compensation; such rights should be evaluated by applying the present value technique;(c) The value of the right to receive compensation cannot be less than the compensation awarded by the Collector; and(d) Appropriate allowance should be given for the risks and uncertainties and other hazards of litigation.The appeals thus got restored to the Tribunal. The assessee filed a paper book showing how the assets were valued by the assessee at the relevant valuation dates and how the Tribunal in the earlier appellate orders determined the value of the assets in their order. She had also filed another statement showing the award made by the Collector on 15-3-1974, the enhancement of the compensation as awarded by sub-Court by its order dated 30-1-1980 and the final determination of the enhanced compensation as made by the High Court in its judgment dated 28-1-1987 and the said computation is to be found at para 1 of its order. The Tribunal noted that there was no dispute about the figures furnished. The dispute was only about what the value should be attached to the assets based on the above figures. The assessee has got 2/3rd share of interest in the property.3. For the assessment years 197,1-72 to 1973-74 the position was that the lands were notified for acquisition underSection 3(1)of the Land Acquisition Act and, therefore, the assessee was entitled to receive compensation as has been laid down by the Supreme Court in Mrs. Khorshed Shapoor Chenai v. ACED [1980] 122 ITR 21. Following the pronouncement of the Apex Court, the Tribunal held that for the assessment years 1971-72 to 1973-74 the right to. receive compensation will be the present value of Rs. 28,74,577 being the compensation and solatium awarded by the Collector on 15-3-1974 plus the present value of enhanced compensation that was finally determined by the High Court at Rs. 24,03,451.4. For the assessment year 1974-75, the valuation date is 31-3-1974. By that time, the compensation was awarded by the Collector on 15-3-1974. Such compensation was paid to the assessee on 28-6-1974 barely after a period of three months. Therefore, the Tribunal felt that it was not necessary to ascertain the present value of the initial compensation as fixed by the Collector on 15-3-1974. The initial compensation of Rs. 28,74,577 would be taken at its face value for the assessment year 1974-75. The only thing that was to be done was to evaluate the enhanced compensation that was ordered by the High Court on 28-1-1987 in a sum of Rs. 24,03,451. Having regard to the market rate of interest, the Tribunal felt that it would be reasonable to adopt an interest rate of 8%. The Tribunal held that the present value of Re. 1 at an interest rate of 8% at the end of 13 years as per the Table given at para 6A of the order would be .3677, and this would be the multiplying factor for the compensation of Rs. 24,03,451. This would be added to the initial compensation of Rs. 28,74,577. The Tribunal at para 5 of its order held as follows :For the assessment year 1975-76 onwards, it is not necessary to find out the present value of the initial compensation awarded by the Collector. Nor is it necessary to include it in the value of compensation because the assessee was paid compensation on 28-6-1974 and thus the compensation money has entered the wealth stream. Therefore, what is required to be evaluated for and from the assessment year 1975-76 is only the present value of the enhanced compensation at an appropriate rate of interest. The interest rate is adopted at 8% for the assessment years 1975-76 and 1976-77. The multiplying factor at 8% interest rate for the assessment year 1975-76 is .3971 being the present value of Re. 1 at the end of the 12 years and 11 years respectively. The enhanced compensation of Rs. 24,03,451 evaluated at the respective multiplying factors indicated hereto before is given in para 6A of this order.Para 6 of the Tribunal's order which is relevant is as follows :For the assessment years 1977-78 and 1978-79, having regard to the money market conditions, we adopt an interest rate of 10%. Only the present value of the enhanced compensation as ordered by the High Court in a sum of Rs. 24,03,451 falls for our consideration. The present value of Re. 1 at the end of 10 years at 10% interest rate is .3855 and at the end of 9 years is .4241. The final enhanced compensation of Rs. 24,03,451 evaluated at the respective multiplying factors indicated hereto before is given in para 6A of this order.5. In all these computations the Tribunal allowed 25% discount to cover risks, uncertainties and hazards of litigation. In our considered opinion, none of the questions raised by the revenue is a referable question of law. The payments received at future date were shrouded in uncertainties. It is only but proper that its present value is ascertained. The present value of future payments is only a method approved in text books to ascertain the value of money on earlier dates. The Tribunal has followed the guidelines set out by the Hon'ble High Court of Kerala [see (b) in para 2], and also the decision of the Supreme Court cited supra and the present value of Re. 1 received at future date was taken from pages 410 and 411 of Financial Accounting  an introduction by Harold Bierman, Jr./Allan R. Drebin, 1969 Edition. The department, it must be emphasized, did not come with a different method of valuation before the Tribunal after the case was restored to it.6. Now the revenue questions the observation of the Tribunal that the assessee has obtained the compensation etc., only after a tortuous course of litigation. This is purely a finding of fact. It is not as if the assessee got the compensation at her doors immediately upon acquisition. Only some compensation was given and that too after representations one after another. The assessee had to move from forum to forum to obtain what according to it the reasonable amount of compensation. The Collector's award is dated 15-3-1974. The sub-Court granted enhanced compensation on 30-1-1980. The High Court finalised the issue on 28-1-1987. Thus, nearly a span of 13 years was involved. This is not to speak of the acquisition of property in 1971. If that is also taken into account the total period involved for the settlement of the dispute is about 17 years. It is not as if the assessee was remaining idle when the litigation was moving from forum to forum. Add to this the assessments were made on the assessee for the impugned years in far excess amounts against which the assessee has to agitate the matter through the appellate forums and then to the High Court. The Tribunal had in its mind all these factors when it held that the assessee had to undergo a tortuous course of litigation. Thus, this is a case of pure finding of fact.7. The revenue questions granting of 25% discount from the total value of compensation. This was granted keeping in view the observations of the High Court that proper discount should be given to cover risks, uncertainties and hazards of litigation. The percentage was indicated in the open court to which neither party objected. Therefore, we hold that there cannot arise a question of law which can be referred.8. The revenue also questions the method of valuation. It must be fairly stated that the revenue had not come with any method of valuation before the Tribunal when the appeals got restored to it. The method adopted by the Tribunal is known to law and is approved by the Text Books and indicated by the High Court. In fact, the method has been described in the order of the Tribunal. In the circumstances, we decline to grant reference.9. Common question No. 3 does not arise out of the order of the Tribunal. Granting of interest lies in the discretion of the Court. The assessee cannot claim it as a matter of right. Further, the interest in matters of compensation when granted would only constitute the income of the assessee and it cannot partake the nature of compensation itself and the attempt of the Tribunal was to ascertain the value of the right to compensation as on the relevant valuation dates. Therefore, this question does not arise out of the order of the Tribunal.10. In the result, the reference applications are rejected.