Section 2(31): Meaning of Person under Income Tax Act, 1961

As per Section 2(31) of income tax act, 1961- “Person” includes:

(1) An individual

(2) A HUF

(3) A Company

(4) A firm

(5) An association of person or a body of individual

(6) A Local authority etc

(7) Any Artificial Juridicial Person

These are seven categories of persons chargeable to tax under the Act. The aforesaid definition is inclusive and not exhaustive. Therefore, any person, not falling in the above-mentioned seven categories, may still fall in the four corners of the term “person” and accordingly may be liable to tax.

Explanation:

An association of persons or
A body of individuals or
A local authority or
an artificial juridical person

shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

Points to note:

The term “Individual” includes:
- Male and Female
- Major and Minor
- Individual of sound mind as well as unsound mind
HUF consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.
Company means company as defined u/s 2(17) of Income Tax Act, 1961
Panchayat, Municipalities and Municipal Corporations are the examples of Local Authorities
God, Idols and deities (devi-devtas) are the examples of Artificial Judicial Persons
Difference between Association of persons and body ofindividuals:
1. an association of person implies a voluntary getting together for a definite purpose whereas a body of individuals would be just a body without an intention to get-together. For example, Ram is living in Delhi and he supports BJP. Shaym is living in kashmir and he also supports BJP. So, even though, they do not know each other but still they are under same umbrella i.e. BJP and constitute a body of individuals
2. the members of body of individuals can be individuals only whereas the members of an association of persons can be individual or non-individuals (i.e. artificial persons like companies).

Related Cases:

S. 2(31) of IT Act, 1961—Assessment—Four companies under an agreement having formed a consortium for the purpose of bidding and executing a contract and as per the agreement each member has been assigned a specific and distinct field of work and existence of partnership or joint venture among the parties is expressly denied. Hence, such consortium cannot be treated as an AOP and particularly when each member of such consortium is retaining profits and bearing losses individually and, therefore, the applicants (two members of said consortium) can only be subjected to taxation on the basis that they are separate taxable entities—Hyundai Rotem Co. In re. [2010] 230 CTR 468 (AAR)

S. 2(31), 132(1)(c) of IT Act, 1961—Search and seizure—If the warrant of authorisation is issued in the joint names of the assessee and her husband then they can only be assessed jointly as an AOP or BOI. Assessee cannot be assessed in an individual capacity by invoking the provisions of Chapter XIV-B—CIT vs. Smt. Vandana Verma [2010]

S. 2(31) of IT Act, 1961—Assessment—An AOP essentially presupposes a union of the members thereof for a common purpose. There has to be a community of interest. For the purpose of the Act such a combination must be one, the object of which is to secure income, profit or gain. In order that an income can be assessed in the hands of an AOP, it must be derived from a process in which the AOP has some control facilitating contribution of its members for earning the income, profit or gain for which it is formed. In the present matter four individuals had a asset without any intention to carry out a regular business in real estate and therefore, any income earned by these four individuals after selling out the asset is assessable in their individual returns and not assessable in the status of AOP—Sangam Tower vs. ITO (2010) 130 TTJ 104 (ITAT-JP)

S. 2(31) of IT Act, 1961—Association of persons—The assessees are husband and wife and owned a nursing home in equal proportions. For the assessment years 1982-83, 1983-84 and 1985-86, the Settlement Commission came to the conclusion that the rental income and other income earned from the nursing home would be assessed at the hands of the two assessee. The Assessing Officer on the same facts for the assessment year 1995-96 and 1997-98 held that venture constituted as association of persons. No change of circumstances is discernible in the two periods in question and the authorities under the Act has neither come across new facts or circumstances nor suppression of facts and it is only case of taking different view on the facts as obtained before the Settlement Commission. Since view taken by the Settlement Commission has been followed by the authorities under the Act for later periods apart from the preceeding period, therefore, said nursing home cannot be treated as an association of persons of the two assessees—DR. LEELA PRASAD vs. CIT [2010] 322 ITR 171 (PATNA)

S. 2(31) of IT Act, 1961—Assessment—Under the terms of the contract, the sale of equipments and materials took place outside the territories of India and the income in relation thereto cannot be said to accrue or arise in India and, therefore, not liable to be taxaed under the IT Act, 1961—Hyosung corporation, In re. (2009) 224 CTR 329 (AAR)

S. 2(31) of IT Act, 1961—Assessment—Under the terms of the contract, the sale of equipments and materials took place ouside the territories of India and the income in relation thereto cannot be said to accure or arise in India and, therefore, not liable to be taxaed under the IT Act, 1961—Hyosung corporation, In re. (2009) 224 CTR 329 (AAR)

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), 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 non resident sports association participation in game is not the criteria, relavant fector 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(17), (26), (31), 43B, 115J, 115JB of IT Act, 1961, S. 210 Sch. IV of Companies Act, 1956—Business expenditure—Section 43B(a) deals with amounts payable to the sovereign qua sovereign, not amounts payable to the sovereign qua principal. Therefore, S. 43 cannot be invoked in the case of the Electricity Board with regard to electricity duty collected by it pursuant to the obligation u/s 5 of the Kerala Electircity Duty Act, 1963—Kerala State Electricity Board vs. DCIT (2010) 329 ITR 91 (Ker)

S. 2(31), 4 & 45 of IT Act, 1961—Assessment—In the present case after the death of sole male member of the family, the only person left in the family was the widow of the deceased i.e., the assessee and three married daughters. The married daughters cannot be considered as members of the HUF of the late husband of the assessee, however, as per the provisions of S.6 of the Hindu Succession Act, the widow and three married daughters are heirs of class-1 and on the date of death, the property of the deceased would devolve on them in equal shares. Since the property of deceased has been sold out without dividing the same among the assessee and her three married daughters, the capital gains on the sale of the property would be assessable in the hands of the body of individuals (BOI) consisting of the assessee and her three married daughers—ITO Vs. Smt. Shanti Dubey (2011) 139 TTJ 502 (ITAT-Jab)

S. 2(31) & 4 of IT Act, 1961—Status—Status of AOP need not to be proved through an agreement since the business carried on by members together is proved through accounts recovered on search the assessment of assessee in that status is perfectly justified—CIT vs. T. George & M. Syed Alvi (2009) 223 CTR 471 (Ker)

Assessment—Sec. 2(31)(v),5(2), 9(1)(i)—IT ACT, 1961—ABC. In Re. [2012] 249 CTR 329 (AAR)

Reference:

As Per Section 2(31), Of The Income Tax Act, 1961-

“Person” includes—

(i) an individual,

(ii) Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) Every artificial juridical person, not falling within any of the preceding sub-clauses.

Explanation—

For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains.

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