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Section 2 – Income Tax Act, 1961

Income Tax Act, 1961

 

Section 2 DEFINITIONS.

 

In this Act, unless the context otherwise requires, – (1) “Advance tax” means the advance tax payable in accordance with the provisions of Chapter XVII-C; 

 

(1A) “Agricultural income” means – (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;

 

(b) Any income derived from such land by – (i) Agriculture; or 

 

(ii) The performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

 

(iii) The sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause; 

 

(c) Any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

 

Provided that – (i) The building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

 

(ii) The land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated – (A) In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or

 

(B) In any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.

 

Explanation : For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section;

 

(1B) “Amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that – (i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

 

(ii) All the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;

 

(iii) Shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first mentioned company;

 

(2) “Annual value”, in relation to any property, means its annual value as determined under section 23;

 

(4) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252;

 

(5) “Approved gratuity fund” means a gratuity fund which has been and continues to be approved by the Chief Commissioner or Commissioner in accordance with the rules contained in Part C of the Fourth Schedule;

 

(6) “Approved superannuation fund” means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Chief Commissioner or Commissioner in accordance with the rules contained in Part B of the Fourth Schedule;

 

(7) “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 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 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;

 

(7A) “Assessing Officer” means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;

 

(8) “Assessment” includes reassessment;

 

(9) “Assessment year” means the period of twelve months commencing on the 1st day of April every year;

 

(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax or a Deputy Commissioner of Income-tax” under sub-section (1) of section 117;

 

(10) “Average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income;

(11) “Block of assets” means a group of assets falling within a class of assets comprising – (a) Tangible assets, being buildings, machinery, plant or furniture;

 

(b) Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed;

 

(12) “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);

 

(13) “Business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

 

(14) “Capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include –

 

(i) Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

 

(ii) Personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

 

Explanation : For the purposes of this sub-clause, “Jewellery” includes – (a) Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

 

(b) Precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

 

(iii) Agricultural land in India, not being land situate –

 

(a) In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the 1st day of the previous year; or

 

(b) In any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify 20 in this behalf by notification in the Official Gazette;

 

(iv) 6 1/2 per cent Gold Bonds, 1977, 22 or 7 per cent Gold Bonds, 1980, National Defence Gold Bonds, 1980, issued by the Central Government;

 

(v) Special Bearer Bonds, 1991, issued by the Central Government;

 

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government

 

(15) “Charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility

 

(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax under sub-section (1) of section 117;

(15B) “Child”, in relation to an individual includes a step child and an adopted child of that individual;

 

(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117

 

(16A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;

 

(17) “Company” means – (i) Any Indian company, or

 

(ii) Any body corporate incorporated by or under the laws of a country outside India, or

 

(iii) Any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

 

(iv) Any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

 

Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as may be specified in the declaration;

 

(18) “Company in which the public are substantially interested” – a company is said to be a company in which the public are substantially interested –

 

(a) If it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank;

 

(aa) If it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956); or

 

(ab) If it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested : 

 

Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration; 

 

(ac) If it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society;

 

(ad) If it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies;

 

(b) If it is a company which is not a 39 private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely :-

 

(A) Shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder;

 

(B) Shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by –

 

(a) The Government, or

 

(b) A corporation established by a Central, State or Provincial Act, or

 

(c) Any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.

 

Explanation : In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words “not less than fifty per cent”, the words “not less than forty per cent” had been substituted;

 

(19) “Co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies; 

 

(19A) “Deputy Commissioner” means a person appointed to be a Deputy Commissioner of Income-tax under sub-section (1) of section 117;

 

(19AA) “Demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more undertakings to any resulting company in such a manner that – (i) All the property of the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;

 

(ii) All the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;

 

(iii) The property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger;

 

(iv) The resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis;

 

(v) The shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become shareholders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;

 

(vi) The transfer of the undertaking is on a going concern basis;

 

(vii) The demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf. 

 

Explanation 1 : For the purposes of this clause, “undertaking” shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.

Explanation 2 : For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include – (a) The liabilities which arise out of the activities or operations of the undertaking;

 

(b) The specific loans or borrowings (including debentures) raised, incurred and utilised solely for the activities or operations of the undertaking; and

 

(c) In cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value of the assets transferred in a demerger bears to the total value of the assets of such demerged company immediately before the demerger.

 

Related Judgements

 

P. J. EAPEN v. COMMISSIONER OF INCOME-TAX.

 

WARREN TEA LTD. & ANR. v. UNION OF INDIA & ORS.

 

COMMISSIONER OF INCOME-TAX v. BABCOCK & WILCOX OF INDIA LTD.

 

K. G. KESHAVA BHAT v. STATE OF KERALA & OR section

 

DASA BALINJIKA SEVA SANGAM v. COMMISSIONER OF INCOME-TAX.

 

COMMISSIONER OF INCOME-TAX v. NAHATA CHARITABLE TRUST.

 

COMMISSIONER OF INCOME-TAX v. SMT. LAXMIDEVI NATANI. (CIT v. MURLIDHAR TOTLA.)

 

COMMISSIONER OF INCOME TAX v. INTERNATIONAL CLEARING & SHIPPING AGENCY.

 

COMMISSIONER OF INCOME-TAX v. BABCOCK & WILCOX OF INDIA LTD.

 

COMMISSIONER OF INCOME-TAX v. SMT. LAXMIDEVI NATANI. (CIT v. MURLIDHAR TOTLA.)

 

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Income Tax Act, 1961 

 

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