As we all know that the Income Tax Act, 1961 provides for levy of income tax on every person, subject to rules contained therein. The term ‘person’ has been defined under Income Tax Act, 1961 as follows
[A] Person [Section 2(3 1)]
The term ‘Person’ includes
(a) an individual
(b) a Hindu undivided family
(c) a Company
(d) a firm
(e) an association of persons or its body of individuals, whether incorporated or not
(f) a local authority
(g) every artificial juridical person, not falling within any of the person referred above
(h) Association of Persons or Body of Individuals or a Local authority or Artificial Juridical Person shall be deemed a person whether or not such persons are formed or established or incorporated with the object of deriving profits or gains or income.
[B] Company [Section 2(17]
Thus, a Company is also one of the ‘persons’ liable to pay income tax under Income Tax Act, 1961.
Meaning of a company
1. As per Companies Act, 1956
According to Section 3 (1), “ a company means a company formed and registered under this Act or an existing company”.
2. Under Sectioz 2 (17) of Income Tax Act, 1961 a Company means
(i) Any Indian company ; or
(ii) Any body corporate incorporated by or. under the law of a country outside India ; or
(iii) Any institution or association or body which was assessed under Income Tax Act 1961 is a company for any assessment year up to and including the assessment year 1970-7 1 ; or
(iv) Any institution, association or body whether incorporated or not and whether Indian or non Indian which is declared by Central Board of Direct Taxes to be a company.
Thus the definition of company under the Income Tax Act is much broader than the definition under the Companies Act, 1956. Under Clause (iv) of See 2 (17), the Central Board of Direct Taxes (CBDT) has been given power to declare any institution as a ‘company’ under certain situations.
[C] A person having substantial interest in the company [Section 2(32)]
A person is deemed to have substantial interest in the affairs of the company if he is the beneficial owner of equity shares, carrying not less than 20% of the voting power.
[D] Principal Officer [Section 2(35)]
“Principal Officer” means
(i) The secretary, treasurer, manager or agent of the company, or
(ii) Any person connected with the management or administration of the company upon whom the Assessing officer has served a notice of his intention of treating him as the Principal Officer thereof.