CAF-2 · Chapter 12 · Question 6 of 15
XYZ & Co. is an AOP consisting of two individuals and one Private Limited Company, sharing profits equally (1/3rd each). The AOP earned a total taxable income of Rs. 3,000,000. How will this income be assessed for tax purposes?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) The company's share (Rs. 1,000,000) will be excluded from the AOP's total income and taxed separately at corporate rates, while the remaining Rs. 2,000,000 will be taxed in the hands of the AOP.
Explanation
If at least one of the members of an AOP is a company, the share of such company shall be excluded for the purpose of computing the total income of the AOP, and the company shall be taxed separately at the rates applicable to companies according to its share.
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