Association of Persons V. Body of Individuals


Association of persons (AOP) under the Income Tax Act is an entity or unit of assessment. Association of persons means two or more persons who collaborate for a mutual determination with a vision to earn an income. However, the term Person includes any company or association or body of individuals, whether incorporated or not. The association need not be on the basis of a contract.[1] On the other hand, Body of individuals (BOI) means a accumulation of individuals who aimed at convey on some activity with the objective of earning some income. Body of Individuals would comprise only of individuals. Units like companies or firms cannot be members of a body of individuals. It must be noted that, income tax shall not be payable by an assessed in respect of the receipt of share of income by him from body of individuals and on which the tax has already been paid by such body of individuals.[2]


Section 4 of the Income Tax Act, 1961 is the charging section for the tax on income in India and it states that” where any central act enacts that income tax shall be charged for any assessment year at any rate or rates, income tax at that rates or those rates shall be charged for that year in accordance with, and subject to the provisions of Income tax act in respect of the total income of the Previous year of every person.” Now, ‘Person’ as defined under section 2(31) of the Income Tax act, 1961 states that the term ‘Person’ includes:

An Individual

A Hindu undivided family

A Company

A Firm

An Association of persons or a Body of Individuals, whether incorporated or not.

A Local Authority

Every artificial juridical person not falling within the above categories.[3]

In N.V. Shanmugham & Co. v. CIT[4], Therefore, an AOP must be one in which two or more persons join in a common purpose or common action.


The term “Income” in the Income Tax Act indicates a periodical fiscal return ‘coming in’ with some sort of uniformity, or expected regularity, from definite sources. The definition of income Section 2 (24) under the Income Tax Act is inclusive in nature. Income comprises earnings or gains from business or profession including any benefit, amenity, perquisite obtained in the course of such business or profession. Salary income including any benefit, allowance, amenity or perquisite obtained in addition to or in lieu of salary. Voluntary contributions received by a religious or charitable trust or scientific research association or a sports promotion association.[5]

Income of a person from each of these sources is calculated to find out the gross total income of the person. The total income from all the above heads of income is calculated in accordance with the provisions of the Income Tax Act as they stand on the first day of April of any assessment year. Permissible deductions are reduced and then income-tax payable is calculated at the prescribed rates. If income of a person is derived from various heads, the person is entitled to claim deduction permissible under respective head whether or not computation under each head results in taxable income. Since the term person also includes association of persons and body of individuals, they would also be subjected to taxation similarly with certain variations. Residential status of association of persons and body of individuals, having established the source of income of the association of persons, the next step is to define the residential status. Income tax liability depends on the residential status of a person. Association of persons can be either resident or non-resident.


An association of persons may contain of non-individuals but a body of individuals has to consist of individuals only. If two or more persons such as firm, company, Hindu Undivided Family, individual etc. join together, it is called an association of persons. But if only individuals join together then it is called a body of individuals. An association of persons suggests an unpaid getting together for a common design or combined will to engage in an income producing activity, whereas a body of individuals may or may not have common will.

There has been an amendment in section 2 (31)[6] as prior as 1939, the phrase used in 1922 Act was “Association of individuals”. The amendment has tried to eliminate any hesitation so as to the convenience to tax of the unit of an association of which the members might be called Individuals. The phrase “association of person” is of comprehensive introduction. Under section 3 (42) of the General Clauses Act, “person” includes any company or association or body of individuals, whether incorporated or not.[7]


In nutshell it can be concluded that, the term association of persons has a legal meaning and denotes to a unit consuming rights and duties. They are not to be understood factually. For example, if half a dozen people are travelling in a bus, or standing in a bus stop, they may be a group of persons or a body of individuals in the literal sense. But they are not an association of persons in the legal sense. When a disaster occurs or a disaster attacks, and a band of helpers meet at the site and associate or co-operate with each other for providing relief to victims, and not doing anything for their own benefit, they may literally be an association of persons, but they are not an association of persons in the legal sense.

[1] D.r. Monica Singhania & D.r. Vinod K Singhania, Students Guide to Income Tax 356 (57th ed. 2017).

[2] Ibid.

[3] Income Tax Act, 1961, No. 43, Acts of Parliament, 1961 (India).

[4] [1971] 81 I.T.R. 310 S.C. (India).

[5] supra note 1, at 541.

[6] Section 2(31) in The Income- Tax Act,

(31) ” person” includes-

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub- clauses.

[7] Section 3(42), Definitions in General Clauses Act, 1897,  (42) “person” shall include any company or association or body of individuals, whether incorporated or not.

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