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Unit 13: Income from Other Sources

when there is a receipt of income. If that were so, an assessee, who does not receive any Notes
income under the head “other sources”, and incurs an expenditure of ` 10,000, would not
be entitled to set off this amount, which happens to be a loss under that head, against his
income under other heads as provided by section 24 of the Act whereas, if his income is
` 10 as against the same expenditure of ` 10,000, he would be entitled to set off the loss of
` 9,990 against his income under other heads. The learned counsel for the revenue submitted
that what is stated above would be the correct position on a true construction of section 12
of the Act. This is a totally unreasonable and almost an assured position. The language
employed in section 12 of the Act does not compel us to construe it in that manner. Viewed
in the light of the right given to an assessee under section 24 of the Act to set off loss under
one head against his income or profits under other heads, and the scheme adopted in the
Act for computing the total income of an assessee, which is charged to tax, we feel no
hesitation in holding that an assessee’s right for allowances under section 12(2) of the Act
does not depend on the fact whether, in the particular year concerned, he received any
income under the head “other sources”. We, therefore, hold that the amounts paid by the
assessee by way of interest on account of investments on shares are allowances admissible
under section 12(2) of the Act.
In the result, we answer the first part of the first question referred to this court in both the
cases in the negative, and against the assessee. We answer the second part of the said
question in the affirmative, and in favour of the assessee. The above answer would give
the second question in both the cases. In the circumstances of this case, the parties will bear
their own costs. A copy of this judgment will be sent to the Income-tax Appellate Tribunal
as required by section 66(5) of the Act.

Questions
1. Study and analyze the case.
2. Write down the case facts.
3. What do you infer from it?
Source: http://www.indiankanoon.org/doc/31561/

13.6 Summary

Income chargeable under Income-tax Act, which does not specifically fall for assessment
under any of the heads discussed earlier, must be charged to tax as “income from other
sources”.
Section 56(2) specifically provides for the certain items of incomes as being chargeable to
tax under the head such as Dividend, Keyman Insurance policy, Winnings from lotteries,
Contribution to Provident fund, Income by way of interest on securities, Income from
hiring machinery etc., Hiring out of building with machinery, Money Gifts, Share
premiums in excess of the fair market value to be treated as income, income by way of
interest received on compensation.

The entire income of winnings, without any expenditure or allowance or deductions
under Sections 80C to 80U, will be taxable. However, expenses relating to the activity of
owning and maintaining race horses are allowable. Further, such income is taxable at a
special rate of income-tax i.e., 30% + surcharge + cess @ 3%.
Admissible Deductions: The income chargeable under the head “Income from other sources”
is the income after making the deductions such as (a) sum paid by way of commission or
remuneration to a banker or any other person for the purpose of realising such interest,
(b) the deduction shall be allowable in accordance with the provisions of Section 36(1)(va),

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