Association of persons

Parveen Kr. Aggarwal (Querist) 20 December 2009 This query is : Resolved
What is the status of an "Association of Persons" running a business without getting it registered under any Act and which is neither a partnership firm nor an HUF? Which legal provisions apply to such an association?

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Devajyoti Barman (Expert) 20 December 2009
Then no special law is applicable to it. However mere absence of partnership deed may not absolve it from getting the status of partnership firm if from the real relation between the parties in conduct or course of dealing in all relevant facts it fulfills all the tests of partnership firm.

A V Vishal (Expert) 21 December 2009
An association of persons (AOP) under the Income Tax Act is an entity or unit of assessment. It means two or more persons who join for a common purpose with a view to earn an income. 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. Therefore, if two or more persons join hands to carry on a business but do not constitute a partnership they may be assessed as an AOP. But, an AOP does not mean any and every combination of persons. It is only when they associate themselves in an income-producing activity that they become an association of persons.

An AOP may consist of non-individuals but a BOI has to consist of individuals only. If two or more persons (like firm, company, HUF, individual etc) join together, it is called an AOP. But if only individuals join together then it is called a BOI.

An AOP implies a voluntary getting together for a common design or combined will to engage in an income producing activity, whereas a BOI may or may not have common design or will.

Parveen Kr. Aggarwal (Querist) 21 December 2009
Thanks a lot Mr. Vishal. I want to know whether besides the Income Tax Act, there is any other statute providing for regulations of AOPs and relations of members of such associations inter se and with third parties. Please help.

A V Vishal (Expert) 21 December 2009
Apart from taxation point of view there is no other law governing AOP's.

Vineet (Expert) 21 December 2009
Agree with Vishal.

Parveen Kr. Aggarwal (Querist) 21 December 2009
Then under which law any dispute between the members of AOP inter-se and/or with third parties, will be decided.