Written by Faisal Shahnawaz in Taxation FBR clarifies how tax liabilities are handled when an association of persons changes, dissolves or when a business is transferred to another person. ISLAMABAD: The Federal Board of Revenue (FBR) has explained the tax liabilities arising in certain circumstances under the Income Tax Ordinance, 2001, covering changes in the constitution of an association of persons (AOP), discontinuance or dissolution of an AOP, and succession to a business or profession other than on the death of the predecessor. The provisions are contained in Sections 98A, 98B and 98C of the Income Tax Ordinance, 2001, updated up to June 30, 2026. Section 98A: Change in Constitution of AOP Under Section 98A, where the constitution of an association of persons changes during a tax year, the AOP as constituted at the time of filing the tax return is responsible for filing the return for that tax year. However, the income of the AOP is apportioned among the members who were entitled to receive it. Where tax assessed on a member cannot be recovered from that member, the outstanding amount may be recovered from the AOP as constituted at the time the return was filed. The provision therefore establishes continuity of tax filing responsibility despite changes in the membership or constitution of an AOP during the tax year. Section 98B: Discontinuance or Dissolution of AOP Section 98B deals with the tax consequences where a business or profession carried on by an AOP is discontinued or the association is dissolved. Subject to Section 117, the provisions of the Income Tax Ordinance continue to apply, as far as possible, as though the discontinuance or dissolution had not taken place. Every person who was a member of the AOP at the time of its discontinuance or dissolution is jointly and severally liable for the tax payable by the association. This means the tax liability of the dissolved or discontinued AOP can continue to be enforced against its members. The legal representative of a member who has died is also liable in accordance with the applicable provisions of the law. Section 98C: Succession to Business or Profession Section 98C establishes the tax…