Association of Person (AOP) and Body of Individuals (BOI) An AOP under Income Tax Act is an entity or unit of assessment. It means two or more persons who joins for a common purpose with a view to earn an income.

An AOP (Association of Persons) is not defined in the Indian laws. General Clauses Act, 1897 has not defined an AOP directly but, while defining person, it also includes association.

Section 2(31) of the Income-tax Act, 1961 also has not defined AOP, but given similar treatment to AOP the way General Clauses Act has given. An AOP is formed by relation between parties. It may be a consortium or joint venture registered or unregistered. Since association of persons is not defined, the meaning has to be understood from the meaning assigned to the term by the Supreme Court which observed in the case of

CIT vs. Indira Balkrishna (39 ITR 546) that an association of persons, must be one in which two or more persons join in a common purpose or common action and the association must be one the object of which is to produce income, profits or gains.

In nutshell, there must be a common design to produce income. If there is no common design, there is no association. The meaning, as culminates from different decisions of the Supreme Court and the High court, of an AOP is that an association of persons exists when following conditions are satisfied:

(i) Two or more persons join;

(ii) Voluntarily for;

(iii) A common purpose or common action with object to produce profit or gains and

(iv) Combine for in joint enterprise; and

(v) Creates some kind of scheme for common management.

It is evident that an AOP is not created but formed. It may be either registered or unregistered, as the case may be.