TMI Blog1981 (7) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the alternative, what was to be included was after deducting the tax payable by the AOP. The ITO rejected both the submissions. 3. The CIT (A), basing himself on an order of his predecessor, held that the income should not be included. The Department is on appeal. 4. Shri Srinivasan for the Department submitted that the CIT (A) had overlooked the provisions of s. 110. This section clearly provides for the inclusion of the income covered under s. 86(v) for the purpose of determining the rate of tax. He submitted that the assessee's share should be properly included for determining the rate of tax. Shri Trivedi, ld. counsel for the assessee, first pointed out that in the prior year the same point has come up before the Tribunal and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains of the firm computed in the manner laid down in s. 67 on which income-tax is payable by the firm; It will be noticed that what is exempt is any portion of the assessee's share in the profits as computed under s. 67. When it comes to AOP, the provisions read differently we reproduce below s. 86(v). Sec. 86(v): "if the assessee is member of an association of persons, or a body of individuals other than a Hindu Undivided family, a company or a firm, any portion of the amount which he is entitled to receive from the association or body on which income-tax has already been paid by the association or body". According to this section, if is not the share of profit as determined under the statute which is to be included by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. So, the income-tax levied on an AOP is a legitimate outgo. As far as the members of the Association are concerned, what is available to them due the AOP is only the balance of income., 8. Thus, "any portion of the amount which he is entitled to receive form the Association" has to be only a share of net income after the payment of taxes as payable by the Association. 9. Sec. 86(v) is not a charging section. We may, in this connection refer to the decision of the Bombay High Court in 92 ITR 59. When an AOP has no income to be taxed in India, this section does not create a change on a member of the AOP receiving certain amounts from the AOP. Since s. 86(v) clearly exempts the income and s. 110 requires such exempted income to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the members, although for assessment purposes co-operative society is an AOP, the members are assessed only what they are entitled to receive, that is, dividend. It cannot be different for other Association of Persons and their members. 11. We, therefore, hold that the share income from the AOP is includible in the assessee's hands. But, this share has to be determined after deducting from the income of the AOP the tax payable by it. The Deptl. appeal will be partly allowed. 12. In the cross objection, the assessee has mainly advocated for the acceptance of the alternative contention which we have, in the above paragraph, found to be correct. So the cross objection would stand partly allowed. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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