Tuesday, May 27, 2014

Members of AOP couldn’t claim their share of loss when losses of AOP were wiped out due to late filing of return.

Where AOP did not file its return of loss in time and, thus, loss got forfeited, no member of said AOP could claim his share of loss against his individual income.


a)The assessee, a member of Association of Persons (AOP), had entered into a joint venture to put up a wind energy generator. The AOP filed its return beyond the prescribed time-limit.

b)The assessee had claimed that his share of loss in the AOP could be set off against his individual income. The Assessing Officer (‘AO’) rejected the claim of assessee.

c)On appeal, the appellate authorities upheld the decision of AO. The assessee pointed out that section 80 makes no specific reference to section 67A, thus the question of rejecting his claim in respect of loss referable to AOP would not arise. The aggrieved-assessee filed the instant appeal.

The High Court held in favour of revenue as under:

1)Section 67A(2) specifies that the apportioning of the share of a member in the income or loss of the AOP under the various heads of income has to be in the same manner in which the income or loss of the AOP has been determined under each head of income.

2)The determination of loss or income at the hands of AOP leads to the determination of the same at the hands of the member in his assessment. Hence, the grant of relief under section 67A is dependent on the determination of the income at the hands of the AOP.

3)The assessee could not take advantage of the absence of reference of section 67A in section 80 when the AOP was under the legal obligation to file its return declaring loss or income, as the case may be, and had defaulted in filing the return within the time prescribed.

4)The relief that had to be considered for the purpose of section 67A was not dependent on section 80 and for that matter, section 80 had nothing to do with the computation to be done under section 67A by the assessee. Thus, the share of loss of assessee in the AOP could not to be set off against his individual income.- N. JAGADEESAN V. ACIT [2014] 45 taxmann.com 95 (Madras)