2007 (3) TMI 143 - HC - Income Tax

Rebate - Assessee claim rebate u/s 86(v) in the income derived from an AOP but AO contended that assessee not eligible for rebate on the ground that the income derived by assessee from AOP is not taxable - Held that AO contention was correct and allowed

Summary

Issues:
Interpretation of section 86(v) of the Income-tax Act, 1961 for claiming rebate on income from association of persons (AOPs).

Analysis:
The case involved the interpretation of section 86(v) of the Income-tax Act, 1961 regarding the eligibility of the assessee for relief under this provision as a member of AOPs in respect of the specific portion of income of the AOPs. The appellant derived income from 13 AOPs for the assessment year 1983-84, with a share of Rs. 60,853 from these AOPs. The AOPs were beneficiaries of a specific trust, and the issue revolved around the rebate claimed under section 86(v) by the assessee. The Income-tax Officer, Commissioner (Appeals), and the Tribunal had all ruled against the assessee, leading to the reference of the question of law to the High Court.

The High Court analyzed the provisions of section 86(v) in detail. The section states that income-tax shall not be payable by an assessee if they are a member of an AOP on any portion of the amount received from the AOP on which income-tax has already been paid by the AOP. The court emphasized that two conditions must be met for claiming exemption or rebate under this section: firstly, the association must have paid the income-tax, and secondly, the rebate is allowable only on the portion of income on which tax was paid by the association. The court noted that the benefit is available only for the portion of income that has suffered tax, not for the entire amount, as argued by the assessee.

The court referred to relevant case law and highlighted that the interpretation sought by the assessee would go beyond the scope of section 86(v) and provide more benefits than intended by the Act. The court held that the language of the section clearly limits the rebate to the portion of income on which tax has been paid by the association. Therefore, the court concluded that the assessee was not eligible for relief under section 86(v) as claimed and ruled in favor of the Revenue. The judgment emphasized the importance of adhering to the specific language and conditions outlined in the tax provisions for claiming rebates on income from AOPs.

In conclusion, the High Court's judgment clarified the interpretation of section 86(v) of the Income-tax Act, 1961, regarding the eligibility of an assessee for relief on income derived from AOPs. The decision underscored the necessity of meeting the conditions specified in the provision and restricted the rebate to the portion of income on which tax had been paid by the association, rejecting the assessee's claim for exemption on the entire sum.