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CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Returns of various Entities excluding Companies

Under the Income-tax Act, 2025, an AOP has determinate and known shares: Asha 50% and Bhaskar 50%. Its total income is Rs 10,00,000, arrived at without deducting interest of Rs 1,00,000 paid to Asha in respect of the tax year. This is the only payment to any member. What is Asha's share in the income of the AOP?

Asha's share is Rs 5,50,000. The interest of Rs 1,00,000 is deducted first, the balance of Rs 9,00,000 is split equally into Rs 4,50,000 each, and the interest is then added back to Asha's apportioned profit, giving Rs 4,50,000 plus Rs 1,00,000.

  1. ARs 5,00,000
  2. BRs 5,50,000Correct
  3. CRs 4,50,000
  4. DRs 6,00,000

Explanation

Under section 309(2), the interest paid to the member is first deducted: 10,00,000 - 1,00,000 = 9,00,000. This balance is apportioned 50:50, giving Rs 4,50,000 each. The interest is then added to Asha's apportioned profit: 4,50,000 + 1,00,000 = Rs 5,50,000. Rs 5,00,000 results from ignoring the interest, and Rs 4,50,000 from forgetting to add it back.

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