TaxTMI 
TaxTMI 
2014 (9) TMI 1190
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....- which was claimed as exempt by the assessee u/s.10(2A). The assessee, however, during the course of assessment proceedings clarified that exemption u/s.10(2A) has been wrongly claimed and that the assessee is entitled to exemption u/s.86 in respect of the share of income received from two AOPs and exemption u/s.86 should be allowed on the above income. However, the AO did not accept the assessee's claim and held as under :- "3. I have duly considered the submission made by the assessee. The amount of Rs. 2,18,63,262 being the income received by the assessee form the two AOPs has been claimed as exempt u/s 86. The issue is whether tax is not chargeable on the income of Rs. 2,18,63,262 as is claimed. According to the assessee, tax is not payable in respect of the above income in view of the provision of sec. 86. At this point, it would be appropriate to reproduce the provision of sec. 86 which reads as under: Share of member of an association of persons or body of individuals in the income of the association or body. 86. Where the assessee is a member of an association of persons or body of individuals {other than a company or a co-operative society o....
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....tax net book profit of assessee u/s. 115JB, which also included share of profit from two AOPs. 3. By the impugned order, CIT(A) confirmed the action of the AO and assessee is in further appeal before us, wherein following grounds have been taken :- "1A. The learned CIT (A) erred in upholding the addition of Rs. 2,18,39,396/- as taxable income of the appellant as share from two joint venture undertakings in the nature of association of persons (AOPs). 1B. The learned CIT (A) erred in arriving at the conclusion that appellants share in the income of two AOPs was liable to tax in the hands of the appellant not appreciating the provisions of section 67A/86 of the I.T. Act 1961 which lay down the scheme of taxation of members of AOP. 1C. Without prejudice, the ld CIT (A) failed to appreciate that the income of the two AOPs had been charged to tax in their own hands at maximum marginal rate in the assessments completed U/S 143(3) and therefore the rationale advocated by the ld A.O did not hold good. 1D. The action of the ld CIT (A) in upholding the addition has resulted in double taxation of the same income, once in the hands of the AOPs and again i....
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....ember's share in the income of the association or body; (c) where the amount apportioned to a member under clause (a) is a loss, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the member's share in the income of the association or body. (2) The share of a member in the income or loss of the association or body, as computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the association or body has been determined under each head of income. (3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head "Profits and gains of business or profession" in respect of his share in the income of the association or body, be deducted from his share. Explanation.-In this section, "paid" has the same meaning as is assigned to it in clause (2) of section 43." 5....
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....relied on the order of lower authorities and contended that AO has correctly brought to tax the share of assessee in two AOPs. 9. Rival contentions have been considered and record perused. From the record, we found that assessee company is a member of two AOPs, income of which was claimed as exempt u/s.10(2A) in the return of income. It was explained before the AO that assessee has wrongly claimed exemption u/s.10(2A) and it is actually entitled for exemption u/s.86 in respect of share income received from two AOPs. However, the AO did not allow exemption u/s.86 on the plea that the profit of AOPs were eligible for deduction u/s.80IB(10). The AO stated that after claim of deduction u/s.80IB, the income of Cosmos Estate has become nill on which no tax is payable. In respect of Cosmos Properties, the AO stated that entire income was eligible for deduction u/s.80IB(10) except a sum of Rs. 24,066/-. Accordingly, it was held by AO that income of Rs. 24,066/- will be the amount on which tax will not be chargeable as per provisions of Section 86. Balance amount of Rs. 2,18,39,396/- was brought to tax. The CIT(A) confirmed the action of the AO. Income of assessee was also found by the A....
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....le computing share of the assessee company. 10. From the record we also found that the AO has also brought to net of tax its book profit which included share of profit in two AOPs as per provisions of Section 115JB. In this regard contention of learned AR was that amount of share of member from an AOP cannot be included in total income for the purpose of Section 115JB, because income of AOPs have already suffered tax in their respective hands. We do not find any merit in the contention of learned AR insofar as the assessee company had credited their share of income from AOP in its book profit in P&L account and book profit has been worked out after taking into account such share of income in AOP. As per Section 115JB, the book profit means the net profit as shown in the P&L account for the relevant previous year. Therefore, book profit is to be computed on the basis of income shown in the P&L account subject to the adjustment as provided under Explanation 1 to Section 115JB. We had carefully gone through the adjustment provided under Explanation 1 and found that nowhere the explanation provide for exclusion of such share of profit from AOP while computing income u/s.115JB of the....