Income of Association of Persons or Syndicates to be Taxed Separately from That of its Members: Supreme Court [Read Judgement]
The High Court earlier held that taxing income received by an assessee from their membership in an AOP/Syndicate would result in double taxation of the same income
The Supreme Court recently upheld a ruling delivered by the Madhya Pradesh High Court by which it was held that income earned by an Association of Persons (AOP) or syndicate must be assessed in its own hands and cannot be clubbed with the individual income of its members for computing income tax liabilities.
The appeal filed by the Revenue before the Madhya Pradesh High Court arose from assessment proceedings involving Laxmi Narayan Shivhare, the Respondent herein. The primary issue surrounded whether income attributed to certain syndicates or groups should be clubbed with that of the individual members.
The Assessing Officer (AO) treated the profits of the syndicate as assessable in the hands of the assessee, contending that such income was indirectly derived by the assessee by virtue of their position as a member of the AOP.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
On appeal, the Commissioner of Income Tax (Appeals) deleted the additions, observing that the business operations and income streams of the syndicates were independently accounted for and assessed in their respective entities. The Income TaxAppellate Tribunal (ITAT) subsequently affirmed this finding, holding that the Revenue could not assess the same income both in the hands of the syndicate and its individual constituents.
However, the Revenue contested the matter before the Madhya Pradesh High Court, contending that the ITAT erred in treating the syndicate as a separate taxable entity and that the income should have been clubbed with that of the respondent-assessee.
The Division Bench comprising Justice Sushrut Arvind Dharmadhikari and Justice Anuradha Shukla dismissed the appeal, holding that once the income of a syndicate or AOP has been assessed in its own hands, the same cannot be assessed again in the hands of its members. The Court found no error in deleting the additions made by the AO as the same cannot be said to be erroneous and prejudicial to the interest of revenue.
The High Court emphasized that each entity, whether an individual, firm, or association, remains a separate legal character for the purpose of income assessment, and any tax attributed to the income of assessee in respect of his share in the income of “Association of Persons” or “Body of Individuals” is nothing but double taxation of the same income
Aggrieved, the Revenue filed multiple Special Leave Petitions before the Supreme Court.
S Dwarakanath, Nisha Bagchi, Madhulika Upadhyay, Keshav Thakur, Neelakshi Bhaduria, Rekha Pandey, Udai Khanna, Rajat Vaishnaw, Mudit Bansal appeared for the Revenue.
Tushar Jarwal, Rahul Sateeja, Anuradha Dutt, V. N. Dubey, Rohit Dubey, Amit Dubey appeared for the assessee Laxmi Narayan Shivhare.
When the matters were taken up on November 7, 2025, the bench of Justice Mithal and Justice Varale declined to interfere with the findings of the Madhya Pradesh High Court and proceeded to dismiss the petitions.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
