Section 311 — Charge of tax where shares of members in association of persons or body of individuals unknown, etc. Successor to s.167B of the 1961 Act.
Section 311 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) charges tax on the total income of an association of persons or body of individuals at the maximum marginal rate where the individual shares of its members in the whole or any part of its income are indeterminate or unknown, subject to sub-section (2). Sub-section (2) raises that: where the total income of any member of such association or body is chargeable at a rate higher than the maximum marginal rate, the association or body is charged at that higher rate.
Sub-section (3) deals with the case where the individual shares are determinate or known. Clause (a): where the total income of any member for the tax year, excluding his share from the association or body, exceeds the maximum amount which is not chargeable to tax, the association or body is charged at the maximum marginal rate. Clause (b): where the total income of the association or body is chargeable at a rate higher than the maximum marginal rate, sub-clause (i) charges the portion of its total income relatable to that member's share at the higher rate, and sub-clause (ii) charges the balance of its total income at the maximum marginal rate.
Sub-section (4) supplies a deeming rule: shares are deemed indeterminate or unknown if they are indeterminate or unknown, in relation to the whole or any part of the income, on the date of formation of the association or body or at any time thereafter.
An association of persons or body of individuals is taxed as an entity, but the tax actually due depends on who the members are and what they earn — and an association whose member shares are left unstated could otherwise be used to park income at a lower slab rate than the members would pay. The section removes the advantage by charging the association at the maximum marginal rate, and it does so both where the shares are hidden and where they are known but the member is already above the exemption limit.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate on the total income where member shares are indeterminate or unknown | The maximum marginal rate | Subject to sub-section (2), which substitutes a higher rate where a member's total income is chargeable at a rate higher than the maximum marginal rate | Sub-section (1) |
| Rate where a member is taxed above the maximum marginal rate | That higher rate | Applied to the total income of the association or body in a case falling under sub-section (1) | Sub-section (2) |
| Rate where shares are known but a member's other income exceeds the exemption limit | The maximum marginal rate | Where the total income of any member for the tax year, excluding his share from the association or body, exceeds the maximum amount which is not chargeable to tax | Sub-section (3)(a) |
| Split rate where the association's income is chargeable above the maximum marginal rate | The higher rate on the portion relatable to that member's share, and the maximum marginal rate on the balance | Applies where shares are determinate or known and the association's or body's total income is chargeable at a rate higher than the maximum marginal rate | Sub-section (3)(b)(i) and (ii) |
The maximum marginal rate is a floor here rather than a ceiling: sub-section (2) pushes the charge above it where a member is himself taxed at a higher rate, and sub-section (3)(b) splits the association's income so that the part relatable to such a member bears the higher rate while the rest still bears the maximum marginal rate. Knowing the shares does not by itself avoid the maximum marginal rate — under clause (3)(a) it is enough that any one member's own income, leaving out his share from the association, exceeds the maximum amount not chargeable to tax. The deeming rule in sub-section (4) is wide and unforgiving: indeterminacy at the date of formation or at any time thereafter, in relation to the whole or any part of the income, is enough to put the association into sub-section (1), so shares settled later do not undo it for a period in which they were unknown.
Three individuals form an association of persons whose deed does not state their shares in a part of its income. Sub-section (1) charges the association's total income at the maximum marginal rate, and sub-section (4) makes it immaterial that the members later agree on shares, since the shares were unknown at some time. If instead the deed fixes the shares clearly, but one member has other income of eight lakh rupees, exceeding the maximum amount not chargeable to tax, clause (3)(a) still charges the association's total income at the maximum marginal rate.
You meet this at the rate applied in the return and the assessment of an association of persons or body of individuals, and it is the usual ground on which an intimation or assessment order raises a demand by recomputing at the maximum marginal rate rather than the slab rates. The association's own constitution document is the evidence the question turns on.
tax shall be charged on the total income of such association or body at the maximum marginal rate
where the total income of any member of such association or body for the tax year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to, tax shall be charged on the total income of the association or body at the maximum marginal rate
shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter
See the full 1961 to 2025 concordance.
See the circulars index.