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Income Tax Laws – I

Notes (ii) HUF: Under the Income-tax Act, a Hindu Undivided Family (HUF) is treated as a
separate entity for the purpose of assessment. It is included in the definition of the
term “person” under section 2(31). The levy of income-tax is on “every person”.
Therefore, income-tax is payable by a HUF. “Hindu undivided family” has not been
defined under the Income-tax Act. The expression is however defined under the
Hindu Law as a family, which consists of all males lineally descended from a common
ancestor and includes their wives and unmarried daughters. The relation of a HUF
does not arise from a contract but arises from status.
A Hindu is born into a HUF. A male member continues to remain a member of the
family until there is a partition of the family. After the partition, he ceases to be a
member of one family. However, he becomes a member of another smaller family.
A female member ceases to be a member of the HUF in which she was born, when
she gets married. Thereafter, she becomes a member of the HUF of her husband.
Some members of the HUF are called co-parceners. They are related to each other
and to the head of the family. HUF may contain many members, but members
within four degrees including the head of the family (kartha) are called co-parceners.
A Hindu co-parcenary includes those persons who acquire by birth an interest in the
joint coparcenary property. Only the coparceners have a right to partition. A Jain
undivided family would also be assessed as a HUF, as Jains are also governed by the
laws as Hindus.
(iii) Company [Section 2(17)]: For all purposes of the Act the term ‘Company’, has a much
wider connotation than that under the Companies Act. Under the Act, the expression
‘Company’ means:
any Indian company as defined in section 2(26); or

anybody corporate incorporated by or under the laws of a country outside
India, i.e., any foreign company; or
any institution, association or body which is assessable or was assessed as a
company for any assessment year under the Indian Income-tax Act, 1922 or for
any assessment year commencing on or before 1.4.1970 under the present Act;
or
any institution, association or body, whether incorporated or not and whether
Indian or non-Indian, which is declared by a general or special order of the
CBDT to be a company for such assessment years as may be specified in the
CBDT’s order.

Did u know? What are the types of companies?
There are two types of Companies:
(1) Domestic Companies [Section 2(22A)] - means an Indian company or any other
company which, in respect of its income liable to income-tax, has made the prescribed
arrangements for the declaration and payment of dividends (including dividends
on preference shares) within India, payable out of such income.
(2) Foreign Companies [Section 2(23A)] - Foreign company means a company which is
not a domestic company.

(iv) Firm: The terms ‘firm’, ‘partner’ and ‘partnership’ have the same meanings as assigned
to them in the Indian Partnership Act. In addition, the definitions also include the
terms as they have been defined in the Limited Liability Partnership (LLP) Act, 2008.

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