Under Section 2(31), A ‘Person’ is An Association Of Persons (AOP) or a Body Of Individuals (BOI) or a Local Authority or an Artificial Juridical Person, whether or not, such Person or Body or Authority or Juridical Person, was formed or established or incorporated with the object of deriving income, profits or gains.
In other words, A Person includes…
(i) An Individual
(ii) A Hindu Undivided Family (HUF)
(iii) A Company
(iv) A Firm
(vi) A Local Authority
(vii) Every Artificial Judicial Person not falling within any of the preceding sub-clauses.
(a) An individual : means a natural person i.e. a human being. It includes a male, female, minor child. However, the income of a minor is now generally included in the income of a parent. Sometimes the minor is himself liable to tax on income earned by him. Since minor is not competent to contract, his income shall be taxable through his legal guardian.
(b) A Hindu Undivided Family (HUF) : has not been defined under the tax laws. However, as per the Hindu law, it means a family which consists of all persons lineally descended from a common ancestor including their wives and daughters.
(c) A firm : shall have the meaning assigned to it in the Indian Partnership Act, 1932 and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008.
(d) Association Of Persons: The Income-tax Act does not define an association of persons (AOP). In the absence of any definition, the words must be construed in their plain ordinary meaning.
Association of persons means two or more persons who join for a common purpose with a view to earn an income. It need not be on the basis of a contract. Therefore, if two or more persons join hands to carry on a business but do not constitute a partnership, they may be assessed as an Association of Persons (AOP).
An Association of Persons does not mean any and every combination of persons. It is only when they associate themselves in an income-producing activity that they become an association of persons. They must combine to engage in such an activity; the engagement must be pursuant to the combined will of the persons constituting the association; there must be a meeting of the minds, so to speak. In a nutshell, there must be a common design to produce income.
(e) Body of individuals (BOI) : means a conglomeration of individuals who carry on some activity with the objective of earning some income. It would consist only of individuals. Entities like companies or firms cannot be members of a body of individuals.
- An AOP may consist of non-individuals but a BOI has to consist of individuals only. If two or more persons (like firm, company, HUF, individual etc.) join together, it is called an AOP. But if only individuals join together then it is called a BOI. For example, where X, ABC Ltd. and PQ & Co. (A firm) join together for a particular venture then they may be referred to as an AOP. If X, Y and Z join together for a particular venture, but do not constitute a firm then they may be referred to as a body of individuals.
- An AOP implies a voluntary getting together for a common design or combined will to engage in an income producing activities, whereas a BOI may or may not have such common design or will. In case of AOP as well as BOI, the provisions relating to computation of total income and taxability of such income are same.
(f) A local authority: The expression local authority means:
(i) Panchayat; or
(ii) Municipality; or
(iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local funds; or
(iv) Cantonment Board.
(g) Artificial Juridical Persons : are entities which are not natural persons but are separate entities in the eyes of law. Though they may not be sued directly in a court of law but they can be sued through persons managing them.
God, idols and deities are artificial persons. Though they may not be sued directly they can be legally sued through the priests or the managing committee of the place of worship, etc. They are persons and their income, like offerings and donations, are taxable. However, under the Income-tax Act, they have been provided exemption from payment of tax under separate provisions of the Act, if certain conditions mentioned therein are satisfied.
Similarly, all other artificial persons, with a juristic personality, will also fall under this category, if they do not fall within any of the preceding categories of persons e.g., University of Delhi is an artificial person as it does not fall in any of the six categories mentioned above.
For Example :
(i) Calcutta University. – Artificial Judicial Person
(ii) Essen Paints Pvt. Ltd. – A Company
(iii) Punjab Bank Ltd. – A Company
(iv) A and B are legal heirs of C. C died in 2018 and A and B carry on his business without entering into a partnership. – A Body of Individual
(v) Shri Krishna Enterprises, a firm consisting of three partners S, K and P. – A Firm
(vi) A joint family consisting of P, Mrs. P and their son S. – A Hindu Undivided Family (HUF)
(vii) Municipal Corporation of Delhi. – A Local Authority