INCOME-TAX ACT, 1961
CHAPTER I
PRELIMINARY
Definitions
2. In this Act, unless the context otherwise requires,—
(1) "agricultural income" means—
(a) any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in India or is subject to local rate assessed and collected by officers of the Government as such;
(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 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 storehouse, or other out-building;
1[(1A) "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 ;
(3) "Appellate Assistant Commissioner" means a person appointed to be an Appellate Assistant Commissioner of Income-tax under sub-section (1) of section 117 ;
(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 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 Commissioner in accordance with the rules contained in Part B of the Fourth Schedule ;
(7) "assessee" means a person by whom 1[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 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;
(8) "assessment" includes reassessment;
(9) `'assessment year" means the period of twelve months commencing on the 1st day of April every year;
(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 ;
2[(11) * * *]
(12) "Board" means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963;
(13) "Business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;
(14) "capital assets" 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, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him;
(iii) agricultural land in India;
3[(iv) 6˝ per cent Gold Bonds, 1977 4[or 7 per cent Gold Bonds, 1980 5[or National Defence Gold Bonds, 1980] issued 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 not involving the carrying of any activity for profit;
(16) "Commissioner" means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117;
(17) "company" means—
(i) any Indian company, or
(ii) any association, whether incorporated or not and whether Indian or non-Indian, which is or was assessable or was assessed under the Indian Income-tax Act, 1922 (11 of 1922), as a company for the assessment year commencing on the 1st day of April 1947, or which is declared by general or special order of the Board to be a company for the purposes of this Act;
(18) "company in which the public are substantially interested"— A company is said to be a company in which the public are substantially interested—
1[(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 ; or]
(b) 2[if it is a company which is not a private company] as defined in the Companies Act, 1956 (1 of 1956), and
(i) its 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 3[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 where such subsidiary company fulfils the conditions laid down in clause (b) of section 108 (hereinafter in this clause referred to as the subsidiary company), or
(d) the public (not being a director, or a company to which this clause does not apply)]:
(ii) the said shares were at any time during the relevant previous year the subject of dealing in any recognised stock exchange in India or were freely transferable by the holder to other members of the public ; and
(iii) the affairs of the company, or the shares carrying more than fifty per cent of its total voting power were at no time during the relevant previous year controlled or held by five or less persons.
Explanation 1.—In computing the number of five or less persons aforesaid,—
(i) the Government or any corporation established by a Central, State or Provincial Act or company to which this clause applies 1[or the subsidiary company of such company] shall not be taken into account, and
(ii) persons who are relatives of one another, and persons who are nominees of any other person together with that other person, shall be treated as a single person.
Explanation 2—In its application to 2[an Indian Company whose business 3[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]. Sub-clause (b) shall have effect as if for the words "not less than fifty per cent" and "more than fifty per cent" the words "not less than forty per cent" and "more than sixty per cent" had been substituted ;
(19) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any State for the registration of co-operative societies;
(20) "Director", "manager" and "managing agent", in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956;
(21) "Director of Inspection" means a person appointed to be a Director of Inspection under sub-section (1) of section 117, and includes a person appointed to be an Additional Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection ;
(22) "dividend" includes—
(a) any distribution by a company or accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;
(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not ;
(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not;
(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not;
(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder, being a person who has a substantial interest in the company, or any payment by any such company on behalf, or for the individual benefit, of any such shareholder to the extent to which the company in either case possesses accumulated profits ; but "dividend" does not include—
(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;
1[(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964] 2[and before the 1st day of April, 1965 ;]
(ii) any advance or loan made to shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e) to the extent to which it is so set off.
Explanation 1—The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1965, or after the 31st day of March, 1948, and before the 1st day of April, 1956.
Explanation 2—The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation 1[but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place.]
2[(22A) "fair market value", in relation to a capital asset, means—
(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and
(ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act ; ]
(23) "firm", "partner" and "partnership" have the meaning respectively assigned to them in the Indian Partnership Act, 1932 ; but the expression "partner" shall also include any person who being a minor, has been admitted to the benefits of partnership ;
(24) "income" includes—
(i) profits and gains ;
(ii) dividend ;
(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;
(iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;
(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ;
1[(va) the value of any benefit or perquisite taxable under clause (iv) of section 28 ;]
(vi) any capital gains chargeable under section 45 ;
(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;
2[(viii) any annuity due, or commuted value of any annuity paid, under the provisions of section 280-D ;]
(25) "Income-tax Officer" means a person appointed to be an Income-tax Officer under section 117 ;
3[(25A) "India" shall be deemed to include the union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry—
(a) as respects any period, for the purposes of section 6 ; and
(b) as respects any period, included in the previous year, for the purpose of making any assessment for the assessment year commencing on the 1st day of April, 1963, or for any subsequent year ;]
(26) "Indian company" means a company formed and registered under the Companies Act, 1956, and includes—
(i) a company formed and registered under any law relating to companies formerly in force in any part of India other than the State of Jammu and Kashmir 3[and the union territories specified in sub-clause (iii) of this clause]);
(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;
3[(iii) in the case of any of the union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that union territories :]
Provided that the registered office of the company in all cases is in India ;
(27) "Inspecting Assistant Commissioner" means a person appointed to be an Inspecting Assistant Commissioner of Income-tax under sub-section (1) of section 117 ;
(28) "Inspector of Income-tax" means a person appointed to be an Inspector of Income-tax under sub-section (2) of section 117 ;
(29) "legal representative" has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 ;
(30) "non-resident" means a person who is not a "resident", and for the purposes of sections 92, 93,1[***] and 168, includes a person who is not ordinarily resident within the meaning of sub-section (6) of section 6;
(31) "person" includes—
(i) an individual,
(ii) a 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-clause ;
(32) "person who has a substantial interest in the company", in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power ;
(33) "prescribed" means prescribed by rules made under this Act;
(34) "previous year" means the previous year as defined in section 3;
(35) "principal officer", used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the Income-tax Officer has served a notice of his intention of treating him as the principal officer thereof;
(36) "profession" includes vocation;
(37) "public servant" has the same meaning as in section 21 of the Indian Penal Code, 1860 ;
2[(37A) "rate or rates in force" or "rates in force", in relation to as assessment year or financial year, mean—
(i) for the purposes of calculating income-tax under the first proviso to sub-section (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 of deducting income-tax under section 192 from income chargeable under the head "Salaries" 1[or sub-section (9) of section 80E from any payment referred to therein] or computation of the "advance tax" payable under Chapter XVII-C, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year ;
(ii) for the purposes of deduction of tax under sections 193, 194, 194A and 195, the rate or rates of income-tax specified in this behalf in the Finance Act of relevant year ;]
(38) "recognised provident fund" means a provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952;
(39) "registered firm" means a firm registered under the provisions of clause (a) of sub-section (1) of section 85 or under that provision read with sub-section (7) of section 184;
(40) "regular assessment" means the assessment made under section 143 or section 144 ;
(41) "relative", in relation to an individual, means the husband, wife, brother or sister or any lineal ascendent or descendent of that individual;
(42) "resident" means a person who is resident in India within the meaning of section 6;
2[(42A) "short-term capital asset" means a capital asset held by an assessee for not more than *[twenty four months] immediately preceding the date of its transfer 3[but does not include a capital asset, being a certificate issued by an authorised dealer as defined in clause (ai) of section 2 of the Foreign Exchange Regulation Act, 1947, (7 of 1947) as evidence of the remittance of foreign currency or other foreign exchange [as defined respectively in clause (c) and clause (d) of the said section] to India from a country outside India in accordance with the provisions of the said Act and any rules made thereunder, during the period commencing on the 26th day of October, 1965 and ending on the 28th day of February, 1966, or such later date as the Central Government may, by notification in the Official Gazette, specify in this behalf, notwithstanding that such capital asset has been held by the assessee for not more than *[twenty-four months] immediately preceding the date of its transfer.]
Explanation (i) - In determining the period for which any capital asset is held by the assessee—
(a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation ;
(b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in 1[sub-section (1)] of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section;
1[(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in conside-ration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee;]
(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf;
2[(43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act, prior to the aforesaid date ;
(43A) "tax credit certificate" means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXIIB and any scheme made thereunder ;]
(44) "Tax Recovery Officer" means—
(i) a Collector or an additional Collector ;
(ii) any such officer empowered to effect recovery of arrears of land revenue or other public demand under any law relating to land revenue or other public demand for the time being in force in the State as may be authorised by the State Government, by general or special notification in the official Gazette, to exercise the powers of a Tax Recovery Officer ;
(iii) any Gazetted Officer of the Central or a State Government who may be authorised by the Central Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer.
(45) "total income" means the total amount of income referred to in section 5, computed in the manner laid down in this Act;
3[(46) * * *]
(47) "transfer", in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein on the compulsory acquisition thereof under any law;
(48) "unregistered firm" means a firm which is not a registered firm.
1. Ins. by Sec. 4 of the Finance (No. 2) Act, 1967 w.e.f. 1.4.1967.
1. Subs. by s. 4(i) of the Finance Act, 1965 w.e.f. 1-4-65 for the words "income-tax or super-tax".
2. Clause (11) omitted by s. 4 (ii) of the Finance Act, 1965, w.e.f. 1-4-65.
3. Ins. by the Taxation Laws (Amendment) Act, 1962, w.e.f. 31-12-62.
4. Ins. by s. 2 of the Finance (No. 2) Act, 1965, w.e.f. 1-4-65.
5. Ins. by sec. 2 of Taxation laws (Amendment & Misc. Provisions) Act, 1965.
1. Subs. by s. 4(a)(i) of the Finance Act, 1964 w.e.f. 1-4-1964.
2. Subs. for the words "if it is not a private company" by s. 4(a)(i) of the Finance Act, 1966 w.e.f. 1-4-1966.
3. Subs. by s. 4(iii) of the Finance Act, 1965.
1. Ins. by the Finance Act, 1965 w.e.f. 1-4-65.
2. Subs. by sec. 4 of the Finance Act, 1964 (Act 5 of 1964), w.e.f. 1-4-1964.
3. Subs. by s. 4(a)(ii) of the Finance Act, 1966, w.e.f. 1-4-1966.
1. Ins. by s. 4(iv) of the Finance Act, 1965 w.e.f. 1-4-65.
2. Ins. by s. 4(b) of the Finance Act, 1966 w.e.f. 1-4-66.
1. Ins. by s. 2 of the Direct Taxes (Amendment) Act, 1964 w.e.f. 1-4-1962.
2. Ins. by sec. 4(b) of the Finance Act, 1964 w.e.f. 1-4-64.
1. Ins. by sec. 4(c) of the Finance Act, 1964 w.e.f. 1-4-64.
2. Ins. by sec. 4(c)(ii) of the Finance Act, 1964 w.e.f. 1-4-64.
3. Ins. by the Taxation Laws (Extension to Union Territories) Regulation, 1963 part II of the Schedule thereof, w.e.f. 1-4-1963.
1. Omitted by s. 4(v) of the Finance Act, 1965 w.e.f. 1-4-65.
2. Ins. by sec. 4 of the Finance (No. 2) Act, 1967 w.e.f. 1-4-67.
1. Ins. by Finance Act, 1968 w.e.f. 1-4-1968.
2. Ins. by sec. 3 of the Finance (No. 2) Act, 1962 w.e.f. 1-4-62.
3. Ins. by s. 4(c) of the Finance Act, 1966 w.e.f. 1-4-66.
* Sub. by Finance Act, 1968 w.e.f. 1-4-1969
* The words "twenty four months" stand substituted for the words "twelve months" w.e.f. 1.4.69 vide Finance Act, 1968.
1. Subs. by sec. 4 of the Finance (No. 2) Act, 1967 w.e.f. 1-4-1967.
2. Subs. by s. 4(vi) of the Finance Act, 1965 w.e.f. 1-4-1965.
3. Clause (46) has been omitted by s. 4(vii) of the Finance Act, 1965 w.e.f. 1.4.1965.