Section 167A of the Income-tax Act, inserted by the Finance Act, 1981-Clarification regarding - Income Tax - 320/1982

Section 167A of the Income-tax Act, inserted by the Finance Act, 1981-Clarification regarding Circular No. 320 Dated 11/1/1982 A reference is invited to paragraphs 15.1 to 15.7 of the Explanatory Notes on the provisions relating to direct taxes in the Finance Act, 1981 (Circular No. 308 dated 29th June, 1981* see [1981] 131 ITR (St.) 119, which explain the scope and ambit of section 167A, as inserted by the Finance Act, 1981. 2. A question has been raised whether the provisions of section 167A of the Income-tax Act which provide for charging of tax at the maximum marginal rate on the total income of an association of persons where the individual shares of members in the income of such association are indeterminate or unknown would also apply to income receivable by trustees on behalf of provident funds, superannuation funds, gratuity funds, pension funds, etc., created bona fide by persons carrying on business or profession exclusively for the benefit of the persons employed in such business. The Board have been advised that cases where income received by the trustees on behalf of a recognised provident fund, approved superannuation fund and approved gratuity fund is governed by section 10(25) of the Income-tax Act, the question of their being charged to tax does not arise. So far as cases where income is receivable by the trustees on behalf of an unrecognised provident fund, or an unapproved superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession are concerned, they will continue to be charged to tax in the manner prescribed by section 164(1)(iv) of the Income-tax Act, as hitherto. Similarly, in the cases of registered societies, trade and professional association, social and sports clubs, charitable or religious trusts, etc., where the members or trustees are not entitled to any share in the income of the association or persons, the provisions of new section 167A will not be attracted and, accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate. (Sd.) S.N. Shende Director, Central Board of Direct Taxes. [F. No. 131(31)/81-TP (Pt.)]