Law: Income Tax Act, 1922

Section: 12,12(2)

(a) Income-tax Act (XI of 1922)-----S.12(2)--Assessee acquiring shares of a company for the purposes of getting control of the said company--Such acquiring of shares was neither prohibited under any provision of the Income-tax Act nor it was an unlawful object-¬Expenditure in acquiring shares was undoubtedly on account of commercial expediency and in order to facilitate the carrying on of the business effectively-¬Fact that assessee had paid higher price for acquisition of shares as compared to the prevailing price at the relevant time, could not be a ground for disallowing the adjustment of interest on the borrowed sum under S.12(2) of the Act where there was no finding that the transaction was not genuine. Omerods (India) Private Ltd.' v. Commissioner of Income-tax, Bombay City (1959) 1 Tax (II1) 459 and Eastern Investment Ltd. v. Commissioner of Income-tax, AIR 1951 S C 138 ref. (b) Income-tax Act (XI of 1922)-- ---S.12(2)--Allowable expenditure--Questions of allowableness of expenditure must be decided on facts of each case' the final conclusion is one of law. Indian Radio & Cable Communications Ltd. v. Commissioner of Income Tax, Bombay, 1937 I.T.R.270 and Tata Hydro-Electric Agencies Ltd. v. The Commissioner of Income-Tax, Bombay, 1957 I.T.R. 202 quoted. (c) Income-tax Act (XI of 1922)- ---S.12(2)--Allowable expenditure--Not necessary to show that the expenditure was a profitable one or that in fact any profit was earned. John Moore v. Stewart & Lloyds Ltd. (1906) 6 Tax Cas. 501 and Usher Wittshire Brewery Ltd. v. Bruce 1915 A C 433 quoted. (d) Income-tax Act (XI of 1922)-- ---S.12(2)--Allowable expenditure--Enough to show that the money was expended "not of necessity and with a view to a direct and immediate benefit to the trade but voluntarily and on the ground of commercial expediency, and in order indirectly to facilitate the carrying on of the business". Omerods (India) Private Ltd. v. Commissioner of Income-tax, Bombay City (1959) 1 Tax (III) 459 and British Insulated & Helsby Cables Ltd. v. Artherton 1926 A C 205 ref. (e) Income-tax Act (XI of 1922)- ---S.12(2)--Allowable expenditure--Word "solely"--Meaning--No hard and fast rule can be…

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