Representative Assessee Property, Tax on Firms and Tax on AOP or BOI with Unknown Member Shares
The Income-tax Act, 2025 reorganises the provisions formerly contained in Sections 167, 167A and 167B of the Income-tax Act, 1961. The corresponding current provisions are Section 304(5), Section 324 and Section 311.
Section 304(5) - Remedies against property of representative assessee
A representative assessee is a person who is assessable in a representative capacity in respect of income belonging to or receivable for another person. Section 304 contains the general rules governing the liability of such an assessee.
Remedies against property
Under Section 304(5), the Assessing Officer has the same remedies, and may exercise them in the same manner, against property of any kind vested in or under the control or management of a representative assessee as against property of a person liable to pay tax. This applies whether the demand is raised against the representative assessee or directly against the beneficiary.
The rule preserves effective tax recovery while recognising that property may be held, controlled or managed by a representative assessee for the person represented.
Section 324 - Charge of tax in case of a firm
Section 324 of the Income-tax Act, 2025 is the current provision corresponding to former Section 167A. Where a firm is assessable as a firm, tax is charged on its total income at the rate specified in the applicable Central Act for the relevant tax year.
What the provision establishes
- The taxable person is the firm where it qualifies to be assessed as a firm.
- The charge applies to the firm's total income.
- The applicable rate is supplied by the Central Act governing the relevant tax year.
Section 324 should be read with Section 325, which lays down the statutory requirements for assessment as a firm, including requirements concerning the instrument of partnership and specification of the individual shares of partners.
Section 311 - Tax where shares of AOP or BOI members are unknown
Section 311 applies to an association of persons (AOP) or body of individuals (BOI) where the individual shares of its members in the whole or any part of its income are indeterminate or unknown. In that situation, tax is generally charged on the total income of the association or body at the maximum marginal rate.
Unknown or indeterminate shares
If the individual shares of members are indeterminate or unknown, the total income of the AOP or BOI is charged at the maximum marginal rate. If the total income of any member is chargeable at a rate higher than the maximum marginal rate, the total income of the AOP or BOI is charged at that higher rate.
Where member shares are determinate or known
Section 311 also addresses cases where member shares are known. If the total income of a member for the tax year, excluding that member's share from the AOP or BOI, exceeds the maximum amount not chargeable to tax, the total income of the association or body is charged at the maximum marginal rate.
Where the statutory higher-rate condition applies to a member, the portion of the AOP or BOI income relatable to that member's share is taxed at the higher rate, while the balance is taxed at the maximum marginal rate.
When shares are deemed indeterminate or unknown
For Section 311, individual shares are deemed indeterminate or unknown if those shares, in relation to the whole or any part of the income, are indeterminate or unknown on the date the association or body is formed or at any time thereafter.
Former Sections 167, 167A and 167B of the Income-tax Act, 1961
Former Section 167 authorised the Assessing Officer to proceed against property vested in or under the control or management of a representative assessee in the same manner as against property of a person liable to pay tax, whether the demand was raised against the representative assessee or the beneficiary directly.
Former Section 167A provided that where a firm was assessable as a firm, tax was charged on its total income at the rate specified in the Finance Act for the relevant year.
Former Section 167B prescribed the tax treatment of an AOP or BOI where members' shares were indeterminate or unknown, and also dealt with specified cases involving known shares and the income or applicable tax rates of members.
1961 Act and 2025 Act correspondence
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Remedies against property in cases of representative assessees | Section 167 | Section 304(5) |
| Charge of tax in case of a firm | Section 167A | Section 324 |
| Charge where shares of members in AOP or BOI are unknown | Section 167B | Section 311 |
Practical points
For representative assessees, the recovery provision concerns property vested in or controlled or managed by the representative assessee. For firms, the charge under Section 324 operates together with the statutory conditions for assessment as a firm. For an AOP or BOI, the tax result under Section 311 depends materially on whether member shares are determinate and on the income and applicable rate position specified by the section.
For tax periods and proceedings governed by the Income-tax Act, 1961, the former section numbers and applicable saving provisions remain relevant. The governing tax year and enactment should therefore be identified before applying the current section numbering.
This article provides a general explanation of the statutory provisions. Actual tax treatment depends on the applicable tax year, constitution of the entity, member or partner rights, income, tax rates and other relevant provisions.