Section 167B- Indeterminate/ unknown equivalent to nil share


Section 167B provides that in case shares of members in Association of Persons (AOP) or Body of Individuals (BOI) is unknown or indeterminate, then tax on total income of such AOP or BOI is charged at maximum marginal rate or specified rate whichever is higher.

Currently, there are a lot of AOPs or BOIs assessees where the profits/surplus and/or income is not paid to its members. The same is made in writing through incorporation in bye laws or governing document of such AOPs/ BOIs. It implies that the share of members is nil i.e. determinate or certain/ fixed. However, the Department has taken a stand that in such situations; nil share of members will be treated at par with indeterminate/ unknown share and hence is taxing them at maximum marginal rate instead of the individual slab rates applicable to them normally.

Such assessees are facing genuine hardships and have to go through the lengthy, time consuming and costly litigation process.


It is suggested that in order to reduce avoidable litigation, suitable amendment be made in the section so as to provide clarity that the nil share of members be treated as determinate/ known share and the AOP/ BOI concerned be taxed at individual slab rate normally applicable to it.

Source-  ICAI Pre- Budget Memorandum–2018 (Direct Taxes and International Tax)
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June 2021