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TMI Blog1986 (12) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... irms on account of renovation and which had been treated as capital expenditure by the ITO assessing the firms. He accordingly proceeded to and the proportionate share of the assessees as their wealth in the profit sharing ratio. 2. In the course of hearing before the AAC it was submitted that the theatre buildings in respect of both the firms were the properties of the HUF's of some of the appellants and that these HUFs were not partners in the firms. It was also submitted that the firms did not belong to them. These arguments were however rejected by the AAC on the following grounds: (1) The expenditure in question had resulted in enduring benefits to the firms in which the appellants were partners. (2) That this huge expenditure wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets under consideration (cinema buildings) were shown in the Balance Sheets of the firms. It was contended that revenue expenditure improved the marketability of the asset and made it a better asset. It would accordingly increase in value as a result of revenue expenditure in the form of renovation expenses. According to him the distinction between revenue and capital expenditure was only with a view to deciding whether an item of expenditure was to be allowed in full in one year or over a few years in the guise of a depreciation allowance. 5. In his reply the learned counsel submitted that r. 2-C would not apply as it speaks of an asset not disclosed in the Balance Sheet. According to him the determination of expenditure whether capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WT Act, 1957 which reads as follows: "7(2)(a) Where the assessee is carrying on a business for which accounts are maintained by him regularly, the WTO may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed." 8. We now come to s. 2A of the WT Rules, 1957 which is as follows: "2A. Where the WTO determines under cl. (a) of sub-s. 7 the net value of the assets of the business as a whole having regard to the balance sheet of such business he shall make the adjustments specified in rules 2B, 2C, 2D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been treated as of a capital nature, the value of the various fixed assets in respect of which it has been incurred automatically stands increased to that extent. In case the lease is terminated and the premises go back to the landlord (under normal circumstance) then the lessee would definitely like to be compensated at the market value for the various fixed assets that they have purchased, altered or renovated in the cinema buildings. According to us an expenditure of lakhs would not be given up without a corresponding compensation coming in. We would accordingly agree with the AAC that capital expenditure incurred by the two firms would form part of the assessee's interest in the firms for purpose of wealth-tax. We however hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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