1991 (4) TMI 162 - AT - Income Tax

Summary

Issues:
Interpretation of provisions of s. 167A and s. 86(v) of the IT Act, 1961 regarding taxation of income received from AOPs by an individual.

Analysis:
The case involved the interpretation of provisions of s. 167A and s. 86(v) of the IT Act, 1961 concerning the taxation of income received by an individual from several AOPs of which she was a member. The assessee claimed that the income should be included in her total income for rate purposes only as per s. 167A, while the ITO included it for tax purposes under s. 86(v) due to no tax being paid by the AOPs on the amount. The CIT(A) accepted the assessee's contention and directed inclusion of the amount in question in the total income for rate purposes only. The main contention was that tax should be charged under s. 86(v) since income was distributed by AOPs to members without paying taxes, even though the income was below the taxable limit in most cases. However, the Tribunal held that the provisions of s. 167A were applicable to the case and the issue was rightly decided by the CIT(A).

The Tribunal explained that prior to the insertion of s. 167A, AOPs were taxable at normal rates after allowing basic exemption benefits. However, with the introduction of s. 167A and the Explanation to s. 86(v), each member of the AOP was deemed to be entitled to receive an equal share in the income of the AOP. This meant that the individual share of each member had to be included in their total income for rate purposes. The Tribunal referred to Board Circulars to support its interpretation of the provisions. It was noted that although there might have been some merit in the Revenue's arguments, the legislature addressed this by amending the provisions in 1985. As the dispute in the current appeal fell under the old provisions, the decision of the CIT(A) in favor of the assessee was upheld.

In conclusion, the Tribunal dismissed the appeal, affirming the decision of the CIT(A) to include the income from AOPs in the assessee's total income for rate purposes only, in accordance with the provisions of s. 167A of the IT Act, 1961.