Law: Income Tax Act, 1922

Section: 12,12(2)

[Income-tax Act, 1922 (XI of 1922)]........Section 12(2)-Income from other sources-Deduction- Wealth-tax- Assessment made from income from other sources-Wealth-tax paid - Whether admissible deduction - Held yes. The scope of the provisions of Section 12(2) is Wider than those of the provisions of Section 10(2)(xvi). For example if property is leased out, the income would be taxable under Section 12. The property taxes and the charges on this property levied would certainly be admissible deductions in the hands of the recipient of the lease money under the provisions of Section 12(2) because the incidence of these expenses would be directly fall on the owner of the property and would be a charge on the recipient of lease money. Unless, therefore, such a liability is cleared there is likelihood of the assets not remaining infact and the source of income would, therefore, dwindle or extinguish. Applying the same principle to the present case, if the wealth tax is not allowed as an admissible deduction the very income yielding asset may be adversely affected and, therefore, Section 12(2) would squarely permit this deduction as well. In a nutshell, therefore, the upshot of the above discussion boils down to this that the wealth tax is something which any holder of assets (wealth) has to pay, and if he devous holds the wealth, the tax must be paid, otherwise he cannot hold these assets. It is a tax different from income tax etc. payable with reference to "profits" earned and has got to be paid, whether the profit or income generating assets yield any return or not. There is no bar against its deduction under any of the provision of Section 12. Like Income Tax etc. It is not an application of, the profits or income earned and is not to be paid out of the income or profits situation of holding earned hut irrespective of these earnings by 1 e mere assets that constitute taxable wealth. Its incidence, therefore, arised directly from he fact of possessing wealth and is not at all dependent on earnings from this wealth. Liability to this obligation does not depend upon whether profits or incomes are made or earned or not. Its payments is obligatory from the very possession…

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