Section 309: computing a member's share in an AOP or BOI's income

What counts as an AOP/BOI for this purpose

For the purposes of Section 309 and sections 310 and 311, "association of persons or body of individuals" does not include a company, a co-operative society, or a society registered under the Societies Registration Act, 1860, or an equivalent law in any part of India.

Step 1: deduct interest, salary, bonus, commission or remuneration paid to members

In computing the total income of an assessee who is a member of an AOP/BOI where the members' shares are determinate and known, the member's share is worked out as follows: any interest, salary, bonus, commission or remuneration (by whatever name called) paid to any member for the tax year is deducted from the AOP/BOI's total income, and the balance is apportioned among the members in their income-sharing proportions.

Step 2: add back or adjust the member's own interest/salary/etc.

The interest, salary, bonus, commission or remuneration paid to that particular member is then added to his apportioned share (if the apportioned amount is a profit), or adjusted against it (if the apportioned amount is a loss) - the resulting figure is the member's share in the AOP/BOI's income.

Apportioning the share across heads of income

A member's share as computed above is, for assessment purposes, apportioned across the various heads of income in the same manner the AOP/BOI's own income or loss was determined under each head.

Interest on capital borrowed to invest in the AOP/BOI

Any interest paid by a member on capital he borrowed to invest in the AOP/BOI is deducted from his share chargeable under the head "Profits and gains of business or profession", in respect of his share of the AOP/BOI's income.

Meaning of "paid"

"Paid" means actually paid, or incurred according to the method of accounting on which the profits or gains are computed under the head "Profits and gains of business or profession".

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