Andhra Pradesh H.C : Whether the right to receive compensation in respect of Valivarthipadu agricultural lands acquired by the Government under the Land Acquisition Act is an agricultural asset ?

Counsel Appeared

Dasaratharma Reddy & P. Srinivasa Reddy, for the Assessee : M. Suryanarayanamurthy, for the Revenue

V. ANJANEYULU, J.:

All these references under the WT Act raise a common issue for consideration. It would, therefore, be convenient to dispose of them together. Learned counsel for the assessee dealt with the reference in R. C. No. 298 of 1982 and stipulated that the decision in this reference would govern the other references also. We shall, therefore, deal with the questions referred to us in R. C. No. 298 of 1982.

The following three questions are referred for the consideration of this Court under s. 27(1) of the WT Act :

“1. Whether the right to receive compensation in respect of Valivarthipadu agricultural lands acquired by the Government under the Land Acquisition Act is an agricultural asset ?

Whether the cist receivable in respect of agricultural lands in Kalipatnam estate under the Rent Reduction Act is an agricultural asset?

Whether the right to receive compensation in respect of agricultural lands at Rajahmundry acquired for E. S. I. hospital by the Government under the Land Acquisition Act is an agricultural asset and hence cannot be taxed ?”

So far as the first and third questions are concerned, the assessee’s contention before the authorities below and before us too is that the compensation receivable in respect of lands acquired partakes or the nature of an agricultural asset and cannot, therefore, be included in the net wealth of the assessee. It is not denied that on the valuation date corresponding to the asst. yr. 1968-69 under consideration, the lands acquired were taken possession of and consequently they vested in the Government. In view of the vesting of the lands in the Government, the assessee ceased to be the owner of the agricultural lands. His only right under the law is to secure compensation for the compulsory acquisition of the land as provided under the Land Acquisition Act. The assessee is entitled to the compensation which the Land Acquisition Officer may award in the first instance. If he is not satisfied with the compensation awarded, it will be open to him to seek enhancement of the compensation.

In either case, it is a claim for payment of money in lieu of the agricultural lands acquired. It is not possible to equate the assessee’s right to receive compensation in respect of agricultural lands, which ceased to be the asset of the assessee on the valuation date, with the agricultural land itself. Learned counsel for the assessee contends that the compensation receivable is merely a substitute for the agricultural land compulsorily acquired by the Government and, consequently, the character of the compensation receivable is synonymous with the character of the agricultural land itself which was the subject-matter of acquisition. We are unable to agree. The agricultural land, so far as the assessee is concerned, ceased to be his property the moment possession was taken. In law, the assessee’s right to receive compensation of a sum of money in respect of that land acquired comes into existence from that date. It is, therefore, clear that from the date possession of the agricultural lands is taken, the compensation due to the assessee is a debt in his favour and is of the character of a non-agricultural asset as any other debt due to the assessee. The compensation receivable in respect of the agricultural lands should, therefore, be regarded as a non- agricultural asset and is liable to be included in the assessee’s net wealth under the WT Act.

Learned counsel submits that the hazard in receiving the compensation claimed by the assessee would render the debt due unpredictable or unascertainable and consequently until the matter becomes final, it should be treated on par with an agricultural asset. The hazard, if any, in the amount of compensation receivable may be relevant for purposes of valuation but has no relevance whatsoever in determining the character of the asset. We, therefore, find that the Tribunal was justified in holding that the right to receive compensation in respect of agricultural lands acquired by the Government under the Land Acquisition Act is not an agricultural asset. Questions Nos. 1 and 3 are accordingly answered in the affirmative, i. e., in favour of the Revenue and against the assessee. Question No. 2 also takes its shade from questions Nos. 1 and 3. It would appear that in respect of certain agricultural lands, the cist payable fell into arrears. The assessee’s claim was that the amount of cist, receivable is an agricultural asset. It cannot be disputed that the cist, when it is received in cash, merges into the non- agricultural assets of an assessee. It is difficult to accept the contention that the cist, before it is received, constitutes an agricultural asset. Like any other debt, it is a sum of money due to the assessee from the tenant to whom the agricultural lands were leased out. The sum total of the cist receivable which was in arrear on the valuation date certainly constitutes a non-agricultural asset for the purpose of assessment. We hold that the Tribunal is justified in coming to the conclusion that the cist receivable also is a non-agricultural asset. We accordingly answer question No. 2 also in the affirmative and against the assessee.

In view of our, answers to the three questions in R. C. No. 298 of 1982, our answers to the questions in the other R. Cs. Nos. 300, 301, 303 and 313 of 1982 are also in favour of the Revenue and against the assessee. There shall be no order as to costs.

[Citation : 171 ITR 160]