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TMI BlogIncome Apportionment in AOPs and BOIs in Clause 309 of the Income Tax Bill, 2025 Vs. Section 67A of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of members within such associations or bodies. They ensure that income is fairly apportioned among members based on their respective entitlements and contributions. The provisions exclude companies, cooperative societies, and societies registered under the Societies Registration Act, 1860, from their ambit. This commentary will delve into the objectives, detailed analysis, practical implications, and comparative analysis of these provisions. Objective and Purpose The primary objective of Clause 309 and Section 67A is to provide a clear framework for computing the share of income or loss attributable to members of an AOP or BOI. The legislative intent is to establish a consistent method for apportioning income, thereby ensuring equitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scenarios where the apportioned amount is a profit or a loss. If a profit, the remuneration paid to the member is added back to the apportioned amount. If a loss, it is adjusted against the apportioned amount. 3. Apportionment of Income:- These sections ensure that the share of a member in the income or loss is apportioned under various heads of income, mirroring the determination of the AOP or BOI's income. This ensures consistency in tax treatment across different income sources. 4. Interest on Borrowed Capital: - Both provisions allow for the deduction of interest paid by a member on capital borrowed for investment in the AOP or BOI, under the head "Profits and gains of business or profession". This deduction recognizes the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larity in complex financial arrangements within AOPs and BOIs. Potential Conflicts:- The introduction of Clause 309 may lead to transitional challenges as entities adapt to any nuanced changes in computation methods. However, the core principles remain aligned, minimizing potential conflicts. Unique Features:- Clause 309's articulation of "paid" and its emphasis on accounting methods may offer greater clarity, reducing ambiguities in tax computations. Conclusion Clause 309 of the Income Tax Bill, 2025, and Section 67A of the Income Tax Act, 1961, are pivotal in ensuring equitable taxation of members within AOPs and BOIs. Their structured approach to income computation, exclusion of certain entities, and provisions for interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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