Member's share of Loss from AOP/BOI

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Puja Agarwalla (Querist)
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30 March 2010 ABC Ltd., a pvt. limited company, is a member of an AOP/BOI, which has incurred loss during the A.Y. 2009-10. What will be the treatment of ABC Ltd.'s share of such loss in its ROI? Can it be set-off from its income from PGBP? Or will it have to be shown separately as Income from Other Sources??

Nilesh Shah

Nilesh Shah (Expert)
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30 March 2010 Nilesh Shah writes:

In the case of AOP or BOI, if the share of the members are determinate, the share of the member (whether a net profit or net loss) in the total income or loss of AOP or BOI shall be computed as under:

(a) any interest, salary, bonus, commission or remuneration by whatever name called, paid to any member shall be deducted from the total income of the AOP or BOI and the balance apportioned among the members in the proportion in which they are entitled to share in the income of the AOP or BOI.

(b) where the amount apportioned to a member under (a) above is a profit, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the AOP or BOI shall be added to the amount, and the result shall be treated as member’s share in the income of the AOP or BOI.

(c) where the amount apportioned to a member under (a) above is a loss, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the AOP or BOI shall be adjusted against the amount, and the result shall be treated as member’s share in the income of the AOP or BOI..

The share of a member in the income or loss of the AOP or BOI, as computed above shall, for the purpose of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the AOP or BOI has been determined under each head of income.

Suppose the member of an AOP or BOI has brought forward loss of Rs 1,00,000 under the head income from house property.

The income of the AOP or BOI is as under:

Income from house property Rs 1,00,000
Profits of business Rs 2,00,000

Assume that the share of the member from AOP is 40%.

In this case the computation of the member shall be as follows:

Income from House property of AOP (40% of 1,00,000) i.e Rs 40,000
Less: Brought forward loss from house property Rs 40,000 Nil

Profits of business of AOP (40% of Rs 2,00,000) Rs 80,000

The balance loss of Rs 60,000 shall not be allowed to be set off from the share of profits of Rs 80,000.

I hope the above shall clarify the issue.

Sincerely,

Nilesh Shah