(a) The purpose of S. 67A is to compute the share of
income/loss in the AOP/BOI. If all the provisions are read together, the
entities specified in the parenthesis in S. 67A would qualify the AOP/BOI and
not the member of such AOP/BOI.
(b) Reference to S. 2(17) indicates that the expression
‘AOP’ includes a company or a cooperative society or a society mentioned in
parenthesis in S. 67A.
(c) The purpose of S. 67A is to determine the share of
income/loss in the profits/losses of the AOP since share is to be included in
the income of the member of AOP for rate purpose as per the provisions of S.
86. However, in the case of a company, cooperative society or society, the
income is not apportioned amongst the members constituting these entities.
Such entities may have income, but may not declare dividend and thus nothing
would be includible in the income of the members of such entities. On the
other hand, these entities may not have income, still they may declare
dividend out of their accumulated profits. Therefore, despite there being no
income in the hands of such entities, the dividend declared by them would be
assessable as income in the hands of members. Therefore, considering the
different schemes of taxation in respect of income received by members from
such entities, the Legislature has excluded these entities from the ambit of
the expression ‘AOP/BOI’.
(d) Had the Legislature not excluded the entities specified
in the parenthesis, it would have resulted in double taxation — once as per
share determined u/s.67A read with S. 86, and again when dividend income is
distributed by such entities to its members.
(e) If the contention of the Revenue is accepted, then it
will lead to absurd result not intended by the Legislature and also will be
detrimental to the interest of the Revenue itself. If it is held that the
words in the parenthesis qualify the word ‘member’ and not the AOP/BOI, then
the company or a cooperative society or a society or other entities in the
parenthesis would not be liable to pay any tax in respect of their share of
income in the AOP/BOI as per the provisions of S. 86, even though such share
of income is includible in the total income. In such cases, the companies or
societies by themselves may not carry on any business and may form various
AOPs/BOIs and may get away by paying lesser rate of tax on such AOP/BOI, since
AOP/BOI (having members whose shares are determinate or known) would be
chargeable to normal rate of tax applicable to individuals. The interpretation
put forth by the Revenue would give birth to legal device for evading the tax
by the entities specified in the parenthesis. Such absurd result could never
have been intended by the Legislature.
(f) It is a well-settled rule of interpretation that
provisions of a statute should be interpreted in a manner which augments the
object behind the legislation and not in a manner which frustrates the object.
