Rate of Tax applicable for AOP - share of member is unknown

[Bipin Parmar]

Dear Sir / Madam,

What's rate of tax applicable on the income earned by AOP - share of members is unknown created for the benefit of persons employed in such business?

Thanks & Regards

Bipin

[ARVIND JAIN]

@Maximum Marginal Rate

167B. Charge of tax where shares of members in association of persons or body of individuals unknown, etc.

(1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate :

Provided that, where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the association or body at such higher rate.

[Bipin Parmar]

Dear Sir,

Thank you for response. I would like to draw your attention to Income Tax Circular : No. 320 [F. No. 131(31)/81-TP(Pt.)], dated 11-1-1982. which says "the provisions of new section 167A will not be attracted and, accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate.

So which will apply as per act or as pre circular?

AI Summary

Tax rate for AOP with unknown member shares: tax charged at maximum marginal rate unless a member's higher rate applies. Where individual shares of members in an association of persons are indeterminate or unknown, tax is charged on the AOP's total income at the maximum marginal rate, except where a member's total income is chargeable at a higher rate, in which case that higher rate applies; an existing administrative circular contends the provision should not apply and that the ordinary rate for the AOP should be used, posing a conflict between the statute's default rule and prior circular guidance.