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Friday, November 08, 2013

Person and Assessee

Q. Define the term “person” and “assessee” under the income tax act. What is regarded as income under the income tax act?
Ans: Person [Section 2(31)]
Person includes seven types of persons namely:
a.       An individual;
b.      An Hindu undivided family (HUF);
c.       A company;
d.      A firm;
e.      An association of persons (AOP) or a body of individuals (BOI);
f.        A local authority;
g.       Every artificial juridical person not falling within any of the preceding sub clauses.
The 2 basic differences between AOP and BOI are:
a) In BOI there are only individuals but in AOP there can be any type of persons.
b) BOI is creation of law whereas AOP can be created by different persons coming together for doing some income producing activity on the voluntary basis.

Assessee [Section 2 (7)]
To mean a person by whom any tax or any other sum of money payable under the Act and include:
i)        Every person in respect of whom any proceeding has been initiated under the act for the assessment of his income or the income of any other person.
ii)       A person who is deemed to be assessee under any provision of the Act.
iii)     A person who is deemed to be an assessee in default in any of the provision of the Act.
The above explanation divides various types of assessee into three categories:
(a)    Ordinary assessee
(b)   Representative assessee or deemed assessee
(c)    Assessee-in-default

Meaning of Income
According to Sec. 2(24) of Income tax Act, 1961, “Income” includes:
(i) profits and gains;
(ii) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes.
(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17;
(iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director
(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59;
(vi) any capital gains chargeable under section 45;
(vii) the profit and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society;
(vii) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;
Explanation: for the purposes of this sub-clause:
a.       “lottery” includes winnings, from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme of arrangement by whatever name called;
b.      “card game and other game of any sort’ includes any game show, an entertainment programme on television or electronic made, in which people compete to win prizes or any other similar game;
(ix) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set-up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948); or any other fund for the welfare of such employees;
(x) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
(xi) any sum referred to in clause (vii) of section 28.

(xii) receipts without consideration – any sum received u/s 56(2) (v) where any sum of money exceeding Rs. 50,000 is received by an individual or HUF from any person on or after 1.9.2009. However this clause is not applied if money received from relative or on occasion of marriage or under will.