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TMI Blog2014 (9) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... ble/will not be chargeable to tax, subject to the proviso to Section 86. So the income of the AOP is to be computed as per the provisions of the Act and the member's share is to be computed as per the provisions of Section 67A of the Act and not otherwise. We accordingly set aside the order of the lower authorities and restore the matter to the file of the AO to work out the total income of the assessee as per the provisions of Section 67A read with provisions of Section 86. Here, it is pertinent to mention that computation of share of the assessee will be dependent upon the final determination/computation of total income of the AOP. If the AOP will not be allowed deduction u/s.80IB, there will be enhancement in the share of the assessee to be computed u/s.67A of the Act. Hence, it is directed that the AO will also take into consideration the total income computed of the concerned AOPs while computing share of the assessee company. AO has also brought to net of tax its book profit which included share of profit in two AOPs as per provisions of Section 115JB - No merit in the AR's contention insofar as Section 115JB has been brought in statute to tax the book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 2,18,63,262 as is claimed. According to the assessee, tax is not payable in respect of the above income in view of the provision of sec. 86. At this point, it would be appropriate to reproduce the provision of sec. 86 which reads as under: Share of member of an association of persons or body of individuals in the income of the association or body. 86. Where the assessee is a member of an association of persons or body of individuals {other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India), income-tax shall not be payable by the assessee in respect of his share in the income of the association or body computed in the manner provided in section 67A : Provided that,- (a) where the association or body is chargeable to tax on its total income at the maximum marginal rate or any higher rate under any of the provisions of this Act, the share of a member computed as aforesaid shall not be included in his total income; (b) in any other case, the share of a member computed as aforesaid shall f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 67A/86 of the I.T. Act 1961 which lay down the scheme of taxation of members of AOP. 1C. Without prejudice, the ld CIT (A) failed to appreciate that the income of the two AOPs had been charged to tax in their own hands at maximum marginal rate in the assessments completed U/S 143(3) and therefore the rationale advocated by the ld A.O did not hold good. 1D. The action of the ld CIT (A) in upholding the addition has resulted in double taxation of the same income, once in the hands of the AOPs and again in the hands of the appellant. 2. The ld CIT (A) erred in arriving at the conclusion that the sum of₹ 2,18,39,396/- as share of the appellant from two joint venture undertakings being AOPs was also chargeable as income U/S 115 JB of the IT. Act 1961. 4. It was contended by learned AR that the AO has wrongly applied provisions of Section 86 read with Section 67A and attempted to bring to tax the accounting profit of the assessee instead of the profit to be worked out as per provisions of Section 67A. He invited our attention to the share of income computed by the AO in para 8 of his order, according to which such share come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manner in which the income or loss of the association or body has been determined under each head of income. (3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head Profits and gains of business or profession in respect of his share in the income of the association or body, be deducted from his share. Explanation.-In this section, paid has the same meaning as is assigned to it in clause (2) of section 43. 5. In sum and substance, the contention of the learned AR was that share of income of member from AOP which can be the subject matter of tax in the hands of individual member cannot exceed amount determined as per provisions of Section 67A, which in the instant case is ₹ 24,066/-. He further placed reliance on the decision of Hon'ble Supreme Court in the case of ITO v. CH. Atchaiah [1996] 218 ITR 239/84 Taxman 630 , wherein the Hon'ble Apex Court has categorically stated as under :- There are no words in the present Act which empower the ITO or give him an option to tax either the AOP or its members individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f AOPs were eligible for deduction u/s.80IB(10). The AO stated that after claim of deduction u/s.80IB, the income of Cosmos Estate has become nill on which no tax is payable. In respect of Cosmos Properties, the AO stated that entire income was eligible for deduction u/s.80IB(10) except a sum of ₹ 24,066/-. Accordingly, it was held by AO that income of ₹ 24,066/- will be the amount on which tax will not be chargeable as per provisions of Section 86. Balance amount of ₹ 2,18,39,396/- was brought to tax. The CIT(A) confirmed the action of the AO. Income of assessee was also found by the AO to be taxable u/s.115JB with respect to the share of income from two AOPs credited in the P L account. There is no dispute to the fact that assessee was having share of income from two AOPs. As per 1st proviso of clause (a) to Section 86 of the IT Act, share of member in AOP is not includible in total income when the income of AOP is chargeable to tax in its own hands at a maximum marginal rate. We are not in agreement with the finding of the lower authorities that since both the AOPs have claimed deduction u/s.80IB(10), the assessee's share of income in these AOPs will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its book profit in P L account and book profit has been worked out after taking into account such share of income in AOP. As per Section 115JB, the book profit means the net profit as shown in the P L account for the relevant previous year. Therefore, book profit is to be computed on the basis of income shown in the P L account subject to the adjustment as provided under Explanation 1 to Section 115JB. We had carefully gone through the adjustment provided under Explanation 1 and found that nowhere the explanation provide for exclusion of such share of profit from AOP while computing income u/s.115JB of the Act. The contention of the learned AR to the effect that assessee has wrongly included the share of income from AOP in the P L account, copy of Board Circular was also placed on record in support of proposition that income tax authority should point out any mistake on the part of assessee and tax should be levied on the correct income of assessee. We do not find any merit in the AR's contention insofar as Section 115JB has been brought in statute to tax the book profit shown in the books of account as Part II Part III of Schedule VI of the Companies Act. It is not the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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