Section 2(7): Meaning of Assessee

By | July 22, 2016

Normally the term ‘Assessee’ is considered as one who is supposed to pay tax. However, its advisable to understand complete meaning of the term as envisaged under the Income Tax Act, as above.

To better understand the term assessee based on above definition, we need to understand the following as well:

Normal/ Ordinary Assessee
  • any person against whom proceedings under Income Tax Act are going on, irrespective of the fact whether any tax or other amount is payable by him or not;
  • any person who has sustained loss and filed return of loss u/s 139(3);
  • any person by whom some amount of interest, tax or penalty is payable under this Act;
  • any person who is entitled to refund of tax under this Act.
Representative Assessee
  • A person may not be liable only for his own income or loss but he may also be liable for the income or loss of other persons
  • e.g. agent of a non-resident, guardian of minor or lunatic etc.
  • In such cases, the person responsible for the assessment of income of such person is called representative assesses.
  • Such person is deemed to be an assessee.
Deemed Assessee
  • In case of a deceased person who dies after writing his will the executors of the property of deceased are deemed as assessee.
  • In case a person dies intestate (without writing his will) his eldest son or other legal heirs are deemed as assessee.
  • In case of a minor, lunatic or idiot having income taxable under Income-tax Act, their guardian is deemed as assessee.
  • In case of a non-resident having income in India, any person acting on his behalf is deemed as assessee.
  • A person is deemed to be an assessee-in-default if he fails to fulfill his statutory obligations.
  • In case of an employer paying salary or a person who is paying interest, it is their duty to deduct tax at source and deposit the amount of tax so collected in Government treasury.
  • If he fails to deduct tax at source or deducts tax but does not deposit it in the treasury, he is known as assessee-in-default.

Related Cases:

S. 2(7), 2(31), 115BBA & 194E of IT Act, 1961—TDS—As per S. 115BBA, the sports personality can be subjected to tax only on receipt of the amount in respect of the transaction mentioned therein namely participation in India in any game or sport, income received or receivable by way of advertisement and income received or receivable by way of contribution of articles relating to any game or sport in India in newspapers, magazines and journals. However in case of nonresident sports association participation in game is not the criteria, relevant factor is payment of guarantee amount in relation to any game or sport played in India. Deduction of tax at source by the payer is one thing and obligation to pay tax is another thing. Therefore, obligation u/s 194E has to be discharged once income accrues u/s 115BBA irrespective of existence of DTAA—Pilcom vs. CIT (2011) 238 CTR 387 (Cal)

S. 2(7), Interest-tax Act, 1974—Interest on loan and advances—Whether or not the interest component of a finance leasing amount received by the assessee bank is liable to be included in ‘chargeable interest’ within meaning of S. 2(7) of the Interest-tax Act, 1974. While allowing the appeal partly, the ITAT, Mumbai ‘E’ Bench held that:—“In Utkarsh Fincap’s case, interest received on inter-corporate deposits, which are nothing but de facto financing transactions, was held to be not includible in ‘chargeable interest’ for the purposes of Interest-tax Act. It is thus clear that merely because a receipt in the nature of interest, it is not sufficient that it can be brought to tax under the Interest-tax Act; it must also be interest on ‘loans and advances’. In the present case, while lease financing is held to be in the nature of mode of loan or finance, lease financing cannot be said to be a loan simplicitor and unless that condition is satisfied, there cannot be an occasion to bring it to tax under the Interest-tax Act. We, therefore, uphold the grievance of the assessee.”—Union Bank of India vs. Additional Commissioner of Income Tax (ITAT, Mumbai)

S. 2(7) of Interest Tax Act, 1974—Interest—if interest is earned on Government securities the ratio of decision in corporation Bank’s case (2008) would apply and no tax would be chargeable on Government securities interest

S. 2(7) of Interest Tax Act, 1974 – Interest Tax – The case of the assessee was that the transactions were in the nature of purchase and sale of shares, for which the delivery was taken and given by the broker. There was no evidence of taking or giving delivery by the broker of the assessee. Taking and giving delivery by the broker of the assessee does not by itself lead to the conclusion that the transaction were for purchase & sale of shares. The reason is that the assessee of vyaj badla transaction is not purchase and sale of shares but to provide finance for smooth carryover of the transactions on the settlement date in respect of persons who are in over bought or oversold position. Therefore, it is not an income from sale of shares. It will be more correct to say that the income was for providing finance to one of the contracting parties for a short period. Therefore, it is a case of extending loan, the income from which will be includible in the chargeable interest.—Tulip Star Hotels Ltd. vs. ITO

S. 2(5B) & 2(7) of the Income Tax Act, 1961—Interest—When transactions of assessee have already been held to be transactions in the nature of finance/loan transaction, and there is no dispute on it, the interest earned by assessee from lease transactions will be chargeable to tax under interest tax Act—Maruti Countrywide Auto Financial Services Ltd. vs. ITO (ITAT-Del)

S. 2(7) of the Interest-tax Act, 1974—Charging of interest—Powers vested in the IDBI u/s 9(1)(b) of its statute—The question which arose for determination in these civil appeals concerned the meaning of rediscounting charges under the Scheme of rediscounting by IDBI—While answering the question in affirmative i.e., in favour of the assessee-bank, the Supreme Court of India held that:—”The primary responsibility for payment to IDBI is , placed on the seller’s bank which in the present case is the assessee-bank. Therefore, the rediscounting charges of IDBI collected by the assessee-bank cannot be “chargeable interest” u/s 2(7) of the 1974 Act since even before the said amount could reach the hands of the assessee-bank, it is impressed with the character of rediscounting charges payable to IDBI.”—CIT, Karnataka vs. Canara Bank (SC)

S. 2(7) of Interest Tax Act, 1974—Interest-tax—According to S. 2(7) of the Interest-tax Act, 1974, the interest must be interest received or receivable on loans and advances made in India. Therefore, the interest charged by the assessee on the delayed payment of installments by the depositors of the recurring deposit accounts is not chargeable interest under the provisions of the Act since it is not interest on a loan advanced by the bank—CIT vs. Bank of Rajasthan Ltd. (2010) 323 ITR 524 (Raj)


As Per Section 2(7), of the Income Tax Act, 1961-

Under the Income Tax Act, 1961 of S. 2(7) is defined “Assessee” as:

“Assessee” means a person by whom (any tax) or any other sum of money is payable under this Act, and includes—

(a)  every person in respect of whom any proceeding under this Act has been taken for the assessment of his income (or assessment of fringe benefits) or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;

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

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

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