Section 115UB(5) — the law in short
What the courts have decided on section 115UB(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.115UB(5) and (6) with Explanation 2: the AIF investor is taxed on income the fund never paid him, and is protected when it is finally paid
CBDT Circulars & InstructionsCuts both ways
My client's Category II AIF has not distributed anything for two years, but the Form 64C shows income allocated to him and he is being asked to pay tax on it. Can he be taxed on money he has not received, and will he be taxed again when the fund finally pays it out?
Yes to the first and no to the second. Section 115UB(6) provides that income accruing or arising to, or received by, the investment fund during a previous year which is not paid or credited to the unit holder shall — subject to the provisions of sub-section (2) — be deemed to have been credited to his account on the last day of the previous year, in the same proportion in which he would have been entitled to receive it had it been paid in that year. Explanation 2 then declares, for the removal of doubts, that income already included in his total income in a previous year on the footing that it accrued or arose in that year shall not be included again in the previous year in which the fund actually pays it to him. Sub-section (5) separately provides that Chapter XII-D and Chapter XII-E do not apply to income paid by an investment fund under the Chapter.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.