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Unit 1: Income Tax: Basic Framework

(d) any institution, association or body, whether incorporated or not and whether Notes
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? There are two types of companies:
(1) Domestic Company [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 Company [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.

However, for income tax purposes a minor admitted to the benefits of an existing

partnership would also be treated as partner. This is specified under section 2(23) of
the Act. A partnership is the relation between persons who have agreed to share the
profits of business carried on by all or any of them acting for all. The persons who

have entered into partnership with one another are called individually ‘partners’ and
collectively a ‘fi rm’.

Notes
1. Consequent to the Limited Liability Partnership Act, 2008 coming into effect in 2009
and notification of the Limited Liability Partnership Rules w.e.f. 1st April, 2009, the

Finance (No.2) Act, 2009 has incorporated the taxation scheme of LLPs in the Income
tax Act on the same lines as applicable for general partnerships, i.e. tax liability
would be attracted in the hands of the LLP and tax exemption would be available to
the partners. Therefore, the same tax treatment would be applicable for both general
partnerships and LLPs.

2. Consequently, the following definitions in section 2(23) have been amended –

(a) The definition of ‘partner’ to include within its meaning, a partner of a limited
liability partnership;

(b) The definition of ‘firm’ to include within its meaning, a limited liability

partnership; and

(c) The definition of ‘partnership’ to include within its meaning, a limited liability
partnership.
(v) Association of Persons (AOP): When persons combine together for promotion of
joint enterprise they are assessable as an AOP when they do not in law constitute
a partnership. In order to constitute an association, persons must join in a common
purpose, common action and their object must be to produce income; it is not enough
that the persons receive the income jointly. Co-heirs, co-legatees or co-donees joining
together for a common purpose or action would be chargeable as an AOP.

Body of Individuals (BOI): It denotes the status of persons like executors or trustees
who merely receive the income jointly and who may be assessable in like manner
and to the same extent as the beneficiaries individually. Thus co-executors or

co-trustees are assessable as a BOI as their title and interest are indivisible.

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