AOP : Share of member in AOP : S. 86 r/w S. 40(ba), of Income-tax Act, 1961 : Assessee-company member of AOP : No bar on company member from getting benefits of S. 86.

[CIT v. Ideal
Entertainment (P) Ltd., 194 Taxman 81 (Mad.)]

The assessee-company was a
member of an association of persons (AOP). The assessee claimed exemption of
interest received from AOP u/s.86 of the Income-tax Act, 1961. The Assessing
Officer disallowed the claim on the ground that the provisions of S. 86 of the
Income-tax Act, 1961 can be made applicable only to the assessee who is not a
company or co-operative society. On a consideration of S. 86 and comparing the
same with S. 40(ba) the Tribunal allowed the assessee’s claim and held that
there is no bar for the assessee to claim the benefits provided thereunder.

On appeal by the Revenue,
the Madras High Court upheld the decision of the Tribunal and held as under :

“(i) A perusal of S. 86
would clearly show that in the case where the assessee is a member of
association of persons, income-tax was not to be payable by the assessee in
respect of his share in the income of the association or body in the manner
provided u/s.67A of the Act. The exclusion provided under the Section that
other than the company or the co-operative society or a society registered
under the Societies Registration Act, 1860 would be made applicable only to
the association of persons or a body of individuals and not to the member. In
other words, if the association of persons or a body of individuals happened
to be a company or a co-operative society or a society registered under the
Societies Registration Act, 1860 then in such an eventuality the member, who
is also an assessee is not entitled to get the benefits provided u/s.86 of the
Act.

(ii) Further, a reading of
S. 40(ba) of the Act would also make it clear that the share of the assessee
under the income of association of persons shall not be taxable. Hence, a
combined reading of the abovesaid provisions would make it clear that there is
no bar for a private company like the assessee from getting the benefits of S.
86 of the Act.”