1981 (7) TMI 101 - AT - Income Tax

Summary

Issues:
1. Inclusion of share of profit of the assessee from an AOP in her assessment.
2. Interpretation of sections 86(v) and 110 regarding the inclusion of income for tax purposes.
3. Clarification on whether the share income from an AOP should be included before or after deducting the tax payable by the AOP.

Analysis:
1. The case involved an appeal against the order of the CIT (A) regarding the inclusion of the assessee's share of profit from an AOP in her assessment. The CIT (A) had held that the income should not be included, leading to the Department filing an appeal.
2. The main contention revolved around the interpretation of sections 86(v) and 110 of the Income Tax Act. The Department argued that the share income should be included for determining the rate of tax, while the assessee's counsel contended that only the share of net income after deducting the tax payable by the AOP should be included.
3. The Tribunal analyzed the provisions of sections 86(v) and 110 in detail. It highlighted the distinction between the treatment of share income from an unregistered firm under section 86(iii) and from an AOP under section 86(v). The Tribunal emphasized that the share of income from an AOP should be the net income after deducting the tax payable by the AOP, as members are entitled to receive only the balance of income after taxes.
4. The Tribunal referred to legal precedents and highlighted that section 86(v) is not a charging section but an exemption provision. It emphasized that unless there is a clear indication that the income should be included without deducting the tax payable by the AOP, it should not be included for rate purposes. The Tribunal also compared the treatment of share income from AOPs with other entities like co-operative societies and foreign companies, where only the net income after taxes is considered for assessment.
5. Ultimately, the Tribunal held that the share income from the AOP should be included in the assessee's hands but after deducting the tax payable by the AOP. The Department's appeal was partly allowed, and the cross objection by the assessee was partly allowed based on the alternative contention accepted by the Tribunal.