Principal Commissioner Vs Ramesh Chandra Rai (Madhya Pradesh High Court)
Conclusion: As per clause (a) of proviso to section 86 of the Act r.w.s 67A of the Act, if the assessee was a member in AOP/BOI and income earned from such AOP/BOI had been offered to tax, then, the share received by assessee from such AOP/BOI after payment of due taxes could not be taxed again in the hands of the recipient assessee.
Also Read SC Judgments in this case:1. Syndicate Income Cannot Be Taxed in Hands of AOP Members: SC 2. Income of AOPs or Syndicates to be Taxed Separately from That of its Members: SC
Held: AO made additions on account of share of assessee in undisclosed income of some syndicates, share in inadmissible expenses incurred by such syndicates and some undisclosed capital invested by assessee in various syndicates. Aggrieved, assessee preferred appeal before CIT(A). CIT(A), adjudicated the appeals of assessee thereby giving substantial relief and also confirming certain additions for the assessment years under consideration. Aggrieved by the relief granted by CIT(A) to assessee, Revenue preferred Appeal before ITAT for the assessment years under consideration and against the deletion of additions made by AO. ITAT dismissed the appeal. Revenue had challenged the order passed by the Income Tax Appellate Tribunal, Indore before the Madhya Pradesh High Court. Revenue argued that the order passed by the ITAT was perverse and not in accordance with law inasmuch as ITAT had committed an error in deleting the additions made by AO on the grounds of assessee share in profit derived by various syndicates maintaining that share of profit was taxable in the hands of syndicate and not in the hands of the assessee as per the existing provisions of the Income Tax Act, 1961. It was held that as per clause (a) of the proviso to Section 86 read with Section 67A, if the assessee was a member of an AOP/BOI and the income earned by such AOP/BOI had been subjected to tax, then the share received by assessee from AOP/BOI after the payment of due taxes could not be taxed again in the hands of the recipient assessee. Agreed with the findings of the CIT and ITAT that the assessee was a member of an association of persons or a body of individuals, and the shares of the members in such an association or body were determinate and known. Such an association or body of individuals was chargeable to tax on its total income at the maximum marginal rate or a higher rate. In such a factual position and circumstances, the share of profit/income received by assessee from association of persons or body individuals/syndicates fall under the clause (a) of the first proviso to section 86 r.w.s 67A of the Act and, thus, AO was not justified in making the addition in the hands of the assessee on account of his share in profits of syndicates and on account of his share of inadmissible expenses incurred by the syndicates.
