Definitions under the Income Tax Act

Table of Contents:

1. Definition of ‘Liable to Tax’: [Sec. 2(29A)]

2. Definition of ‘Company’: [Sec. 2(17)]

3. Definition of  ‘Company in which the public are substantially interested’: [Sec. 2(18)]

4. Definition of ‘Person having substantial interest in the company’: [Sec. 2(32)]

5. Definition of ‘India’: [Sec. 2(25A)]

6. Definition of ‘Indian Company’: [Sec. 2(26)]

7. Definition of ‘Domestic company’: [Sec. 2(22A)]

8. Definition of ‘Foreign company’: [Sec. 2(23A)]

9. Definition of ‘Amalgamation’: [Sec. 2(1B)]

10. Definition of ‘Demerger’: [Sec. 2(19AA)]

Check out Taxmann's Direct Tax Laws & International Taxation (DT) | A.Y. 2023-24 | Study Material which provides a practical application of the subject matter in a holistic approach while testing the analytical skills of the reader. The crux of this book is to strike a perfect balance between 'detailed studies' and a 'summarised approach'. It is written with an explanatory & analytical approach.

1. Definition of ‘Liable to Tax’: [Sec. 2(29A)]

‘Liable to tax’, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country.

[Inserted by Finance Act, 2021]

2. Definition of ‘Company’: [Sec. 2(17)]

Company means:

(i) any Indian company, or

(ii) any body corporate incorporated under the laws of any country outside India, or

(iii) any institution, association or body which was assessed as a company for any assessment year under the Income-tax Act, 1922 or was assessed under this Act as a company for any assessment year commencing on or before 1-4-1970, or

(iv) 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 CBDT to be a company.

3. Definition of  ‘Company in which the public are substantially interested’: [Sec. 2(18)]

Section 2(18) defines ‘A company in which the public are substantially interested’ to include as under:

(i) A company owned by Government or Reserve Bank of India.

(ii) A company in which not less than 40% of the shares are held by Government or RBI or a corporation owned by the RBI.

(iii) Companies registered u/s 25 of the Companies Act, 1956 or Sec. 8 of Companies Act, 2013. However, if at any time these companies declare dividend they would lose the status of a company in which the public are substantially interested.

(iv) A company, declared by the CBDT.

(v) Mutual benefit finance company, where principal business of the company is acceptance of deposits from its members and which has been declared by C.G. to be a Nidhi or a Mutual Benefit Society.

(vi) A company in which at least 50% or more equity shares have been held by one or more co-operative societies.

(vii) A Public Ltd. Company: A Company is deemed to be a public limited company if it is not a private company as defined by Companies Act, 2013 and is fulfilling either of the following two conditions:

(a) Its equity shares were listed on a recognized stock exchange, as on the last day of the relevant previous year; or

(b) Its equity shares carrying at least 50% of the Voting power (in the case of an industrial company, the limit is 40%) were beneficially held throughout the relevant previous year by Government or a statutory corporation or a company in which the public are substantially interested or a wholly owned subsidiary of such a company.

4. Definition of ‘Person having substantial interest in the company’: [Sec. 2(32)]

A person who is –

(i) the beneficial owner of shares (not being shares entitled to a fixed rate of dividend),
(ii) whether with or without a right to participate in profits,
(iii) carrying at least 20% of the total voting power.

5. Definition of ‘India’: [Sec. 2(25A)]

The term ‘India’ means –

(i) the territory of India as per article 1 of the Constitution,

(ii) its territorial waters, seabed and subsoil underlying such waters,

(iii) continental shelf,

(iv) exclusive economic zone, or

(v) any other specified maritime zone and the air space above its territory and territorial waters.

Specified maritime zone means the maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976.

6. Definition of ‘Indian Company’: [Sec. 2(26)]

‘Indian Company’ means a company formed and registered under the Companies Act 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 and the Union Territories);

(a) a corporation established by or under a Central, State or Provincial Act;

(b) any institution, association or body which is declared by the Board to be a company;

(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;

(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 Territory:

Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body, in all cases is in India.

7. Definition of ‘Domestic company’: [Sec. 2(22A)]

A domestic company means an Indian company or any other company which, in respect of its income is liable to tax under the Income Tax Act, has made arrangements for declaration and payment of the dividends (including dividends on preference shares) within India.

8. Definition of ‘Foreign company’: [Sec. 2(23A)]

Foreign company means a company which is not a domestic company.

9. Definition of ‘Amalgamation’: [Sec. 2(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 is so merge being referred to as the amalgamating company or companies and company with which they merge or which is formed as a result of merger, as the amalgamated company) in such a manner that:

(i) all the property or liabilities of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of amalgamation;

(ii) shareholders holding not less that 75% 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 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.

10. Definition of ‘Demerger’: [Sec. 2(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, by a demerged company of its one or more undertakings to any resulting company in such a manner that:

(i) all the property and liabilities of the undertaking being transferred by the demerged company, immediately before the demerger, becomes the property and liabilities of resulting company by virtue of demerger;

(ii) the property and liabilities are transferred by the demerged company at values appearing in its books of account immediately before the demerger:
Provided that this sub-clause shall not be applicable where the resulting company records the value of the property and liabilities at a value different from the value appearing in the books of account of the demerged company, immediately before the demerger, in compliance to the Ind AS specified in Annexure to the Companies (Ind AS) Rules, 2015.

(iii) the resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis except where the resulting company itself is a shareholder of the demerged company;

(iv) the shareholders holding not less than 75% in value of 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 the shareholders of the resulting company or companies by virtue of 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;

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

(vi) the demerger is in accordance with the conditions, if any, notified u/s 72A(5) by the Central Government in this behalf.

For the purposes of this section, the reconstruction or splitting up of a public sector company into separate companies shall be deemed to be a demerger, if such reconstruction or splitting up has been made to transfer any asset of the demerged company to the resulting company and the resulting company:

(i) is a public sector company on the appointed day indicated in such scheme, as may be approved by the C.G. or any other body authorised under the provisions of Companies Act, 2013 or any other law for the time being in force governing such public sector companies in this behalf; and

(ii) fulfils such other conditions as may be notified by the Central Government.

[Inserted by Finance Act, 2021]

Also Read
Basic Concepts of Income Tax Law