Section 12(2) of the Indian Income-tax Act, 1922

Section 12(2) of the Indian Income-tax Act, 1922 — the law in short

What the courts have decided on section 12(2) of the Indian Income-tax Act, 1922, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Smt. Padmavati Jaikrishna v Addl. CIT Supreme CourtHelps departmentValidity unconfirmed
  I borrowed rather than sell my shares, and used the money to pay my income-tax and wealth-tax and to make the compulsory annuity deposit. The interest on that borrowing has been disallowed under s.57(iii). Was that right?
  Yes, it was right. Interest on money borrowed to discharge a personal liability such as income-tax and wealth-tax is not expenditure laid out wholly and exclusively for the purpose of making or earning the income, and even where the borrowing produced some interest — the annuity deposit did fetch interest — the deduction fails because the dominant purpose was to meet a statutory liability and not to earn income.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.