Important Definitions under the Income-tax 

Understanding the Income-tax law in India is crucial for both individuals and entities involved in financial activities. The Income-tax Act, 1961, forms the cornerstone of India's tax legislation, governing the taxation of income earned within the country. This Act, along with its amendments and associated rules, circulars, and notifications, provides a comprehensive framework for assessing and collecting taxes. In this blog, we will delve into the important definitions and components of the Income-tax law, including key terms like "assessee," various categories of taxpayers, the role of the Central Board of Direct Taxes (CBDT), and the impact of judicial decisions on tax practices.

Assessee [Section 2(7)] 

“Assessee” means a person by whom any tax or any other sum of money is payable under this Act. In addition, it includes 

1) Every person in respect of whom any proceeding under this Act has been taken for the assessment of

• his income; or
• the income of any other person in respect of which he is assessable; or
• the loss sustained by him or by such other person; or
• the amount of refund due to him or to such other person.

2) Every person who is deemed to be an assessee under any provision of this Act;

3) Every person who is deemed to be an assessee-in-default under any provision of this Act.

Every assessee is a ‘person’, but every ‘person’ need not be an assessee

Person [Section 2(31)]

(i) Individual

• The term ‘individual’ means only a natural person, i.e., a human being

(ii) HUF

• Under the Income-tax Act, 1961, a Hindu undivided family (HUF) is treated as a separate entity for the purpose of assessment
• "Hindu undivided family" has not been defined under the Income-tax Act. The expression is, however, defined under the Hindu Law as a family
• Some members of the HUF are called co-parceners.
• Head of the family = (Karta)
• A Hindu Coparcenary includes those persons who acquire an interest in joint family property by birth
• Earlier, only male descendants were considered as coparceners. With effect from 6th September, 2005, daughters have also been accorded coparcenary status
• A daughter of coparcener by birth shall become a coparcener in her own right in the same manner as the son
• It may be noted that only the coparceners have a right to partition
• other female members of the family, for example, wife or daughter-in-law of a coparcener are not eligible for such coparcenary right

The relation of a HUF does not arise from a contract but arises from status

(iii) Company [Section 2(17)]

• Domestic company
  • • Indian company
    • Company which has made arrangement for declaring and paying dividend within India out of the income chargeable to tax in India.
• Foreign company

(iv) Firm [Section 2(23)]

The terms ‘firm’, ‘partner’ and ‘partnership’ have the same meanings as assigned to them in the Indian Partnership Act, 1932. In addition, the definitions also include the terms limited liability partnership

(v) Association of Persons (AOP)

Mr. Yash, AB & Co. (Firm) and X (P) Ltd. join together to carry on construction activity otherwise than as a partnership firm, such an association will be recognized as an association of persons

Body of Individuals (BOI)

Mr. A, Mrs. B, and Ms. C are siblings who inherited a piece of agricultural land from their father. Instead of dividing the land, they decide to collectively cultivate crops on it and share the profits. No Formal Agreement: They have not entered into a formal partnership agreement. For income tax purposes, Mr. A, Mrs. B, and Ms. C are treated as a Body of Individuals (BOI)

(vii) Local Authority

• The term “Local Authority” means a municipal committee, district board, body of port commissioners or other authority legally entitled to or entrusted by the
• Government with the control or management of a municipal or local fund.

  (viii) Artificial Juridical Persons

(viii) Artificial Juridical Persons

Artificial Juridical Persons are the entities which are not natural persons but are separate entities in the eyes of law. This is a residual category could cover all artificial persons with a juristic personality not falling under any other category of persons. Deities, Bar Council, Universities are some important examples of Artificial Juridical Persons

Conclusion

Grasping these definitions and their applications is essential for effective tax planning and compliance. For further insights and updates, you can join daily YouTube live classes at 9 PM on the Koncept Education channel, hosted by CA Yashvardhan Saboo. Visit www.konceptca.com for more resources and information.