Types-Definitions and Residential Status of Companies with all Tax Implications are described below in details.
1. Company:
As per section 2(17), company means:
(i) any Indian company, or
(ii) any body corporate incorporated by or under the laws of a country outside India, or
(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922, or which is or was assessable 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:
Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (Whether commencing before 1-4-1871 or on or after that date) as may be specified in the declaration.
2. A Company in which the Public are Substantially Interested:
Section 2(18) of the Income-tax Act, has defined “a company in which the public are substantially interested”. It includes:
(i) A company owned by Government or Reserve Bank of India.
(ii) A company having Govt. participation,
i.e., A company in which not less than 40% of the shares are held by Government or the RBI or a corporation owned by the RBI.
(iii) Companies registered under section 8 of the companies Act, 2013:
Companies registered under section 8 of the Companies Act, 2013 are companies which are promoted with special object such as to promote commerce, art, science, charity or religion or any other useful object and these companies do not have profit motive. However, if at any time these companies declare dividend they would loose the status of a company in which the public are substantially interested.
(iv) A company declared by the CBDT:
It is a company without share capital and which having regard to its object, nature and composition of its membership or other relevant consideration is declared by the Board to be a company in which public are substantially interested.
(v) Mutual benefit finance company,
where principal business of the company is acceptance of deposits from its members and which has been declared by the Central Government to be a Nidhi or a Mutual Benefit Society.
(vi) A company having co-operative society participation:
It is a company in which at least 50% or more equity shares have been held by one or more co-operative societies.
(vii) A public limited company:
A company is deemed to be a public limited company if it is not a private company as defined in the Companies Act, 1956 and is fulfilling either of the following two conditions:
(a) Its equity shares were listed on a recognised 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, a statutory corporation, a company in which the public are substantially interested or a wholly owned subsidiary of such a company.
| An industrial company means a company whose business consists mainly of the construction of ships or the manufacturing or processing of goods or in mining or in the generation or distribution of electricity or any other form of power. |
3. Widely Held Company:
It is a company in which the public are substantially interested.
4. Closely Held Company:
It is a company in which the public are not substantially interested.
5. Indian Company [Section 2(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 ‘and the Union Territories;
(ia) a corporation established by or under a Central, State or Provincial Act;
(ib) any institution, association or body which is declared by the Board to be a company;
- 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.
6. Domestic Company [Section 2(22A)]:
A “domestic company” means an Indian company or any other company which in respect of its income, liable to tax under the Income-tax Act, has made the prescribed arrangements for the declaration and payment within India, of the dividends (including dividends on preference shares) payable out of such income.
7. Foreign Company [Section 2(23A)]:
“Foreign company” means a company which is not a domestic company.
8. Investment Company:
“Investment company” means a company whose gross total income consists mainly of income which is chargeable under the heads ‘Income from house property’, ‘Capital gains’ and ‘Income from other sources’.
9. Residential Status of a Company [Section 6(3)]
(1) When is a Company said to be Resident in India?
A company is said to be resident in India in any previous year, if—
(i) it is an Indian company; or
(ii) its Place Of Effective Management (POEM), in that year, is in India.
(2) When is a Company said to be Non-Resident in India?
A Company will be a non-resident in any previous year, if:
(a) it is not an Indian company
and
(b) its Place Of Effective Management (POEM) , in that year, is not in India.
As POEM based rule of residence has been introduced in the case of a company, in order to provide a transition mechanism for a company which is incorporated outside India and has not earlier been assessed to tax in india, the following section 115JH has been inserted in a case where a foreign company is said to be resident in India due to its POEM being in India for the first time and the said company has never been resident in India before.
