Supreme Court Affirms Income of Association of Persons Cannot Be Taxed in Assessee’s Hands

The Revenue approached the Supreme Court challenging a judgment dated 21 October 2024 of the Madhya Pradesh High Court. The dispute arose when the Department sought to club the income earned by certain Syndicates, treated as Associations of Persons (AOPs), with the income of individual assessees. The Revenue filed two Special Leave Petitions, accompanied by applications seeking condonation of delay in filing.

Main Issue: Whether the income of Syndicates assessed as Associations of Persons (AOPs) can be clubbed with the income of individual assessees for income-tax purposes.

SC Held: The Supreme Court first condoned the delay in filing but ultimately found no merit in the Revenue’s challenge. The Bench categorically held that the income belonging to an AOP cannot be clubbed with that of individual assessees, effectively endorsing the High Court’s view. The Court observed that the AOP, being a separate taxable entity under the Income Tax Act, must be assessed independently.

Therefore, the SLPs were dismissed, and all pending applications were disposed of. With this dismissal, the Supreme Court reaffirmed the principle that income attributable to an AOP cannot be shifted to individual members unless expressly permitted by statute, thereby upholding the High Court’s ruling in full.

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