The Jabalpur bench of Madhya Pradesh High Court has held that the share received by the assessee from such Association of Persons (AOP)/ Body Of Individuals (BOI) after payment of due taxes cannot be taxed again in the hands of the recipient assessee.
The bench of Justice Sushrut Arvind Dharmadhikari and Justice Anuradha Shukla has observed that the assessee was a member of an association of persons or body individuals, share of members of such association of persons or body individuals were determinate and known. Such associations of persons or body individuals were chargeable to tax on their total at the maximum marginal rate or any higher rate.
The bench held that the share of profit/income received by the 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, the 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.
Table of Contents
Background
The appeals have been filed by the appellants under Section 260A of the Income Tax Act, 1961 being aggrieved by the order passed in by the Income Tax Appellate Tribunal, Indore.
The respondent/assessee is an individual mainly deriving income from carrying out the business of sale of liquor. Besides, the assessee also derived income from his hotel business under a proprietorship concern namely M/s. Hotel Ambrosia.
The assessee also derives income from certain partnership firms in which he is one of the partners. The assessee also derives salary and rental income. The assessee furnished his original returns of income for the various years under Section 139 of the Act of 1961.
Search and seizure operations under Section 132 of the Act was carried out at various premises of Shivhare group and the assessee on 07.01.2016. Consequently, notices under Section 153A of the Act was issued to the assessee for Assessment Year 2010-11 to Assessment Year 2015-16 on 27.10.2016. In response to the above notices, the assessee filed returns of income for Assessment Years 2010-11 to 2015-16 on various dates. The assessee filed a regular return of income for Assessment Year 2016- 17 declaring income.
The department raised the issue whether, the ITAT had erred in deleting the additions (of various amounts in other connected appeals) made by the Assessing Officer on the ground of appellant’s share in profit derived by various syndicates maintaining that share of profit is taxable in the hands of syndicate and not in the hands of the assessee as per the extant provisions of the Income Tax Act.
Arguments
The department contended that the order passed by the ITAT is perverse and not in accordance with law inasmuch as ITAT has committed an error in deleting the additions made by the Assessing Officer on the grounds of assesses share in profit derived by various syndicates maintaining that share of profit is 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.
Conclusion – Payment Of Due Taxes
The court held that as per clause (a) of proviso to section 86 of the Act r.w.s 67A of the Income Tax Act, if the assessee is a member in AOP/BOI and income earned from such AOP/BOI have been offered to tax, then, the share received by the assessee from such AOP/BOI after payment of due taxes cannot be taxed again in the hands of the recipient assessee.
The court held that the Tribunal has not committed any error in deleting the additions which was made by the Assessing Officer as the same cannot be said to be erroneous and prejudicial to the interest of revenue. Thus, the cases does not involve any substantial question of law so as to meet the provisions of Section 260-A of the Income Tax Act for admitting these appeals.
Case Details
Case Title: Principal Commissioner Of Versus Shri Ramesh Chandra Rai
Case No.: INCOME TAX APPEAL No. 272 of 2022
Date: 21.10.2024
Counsel For Appellant: Siddharth Sharma
Counsel For Respondent: Vashistha Narayan Dubey
