Person and Assessee | Every assessee is a person but every person is not an Assessee

[Meaning of Person in Income Tax, Meaning of Assessee in Income Tax, Every assessee is a person but every Person is not an Assessee]

Q. Define the term “assessee” and “person” under the income tax act considering the point every assessee is a person but every person is not an assessee.

Meaning of Person in Income Tax

Person [Section 2(31)]: Person includes seven types of persons namely:

a.       An individual;

b.      A Hindu undivided family (HUF);

c.       A company;

d.      A firm;

e.      An association of persons (AOP) or a body of individuals (BOI);

f.        A local authority;

g.       Every artificial juridical person not falling within any of the preceding sub-clauses.

An association of person or body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person was formed or established or incorporated with the object of deriving income, profits and gains. AOP and BOI are different terms. The 2 basic differences between AOP and BOI are:

a) In BOI there are only individuals but in AOP there can be any type of persons.

b) BOI is a creation of law whereas AOP can be created by different persons coming together for doing some income producing activity on a voluntary basis.

Meaning of Assessee in Income Tax

Assessee [Section 2 (7)]: Assessee means a person by whom any tax or any other sum of money payable under the Act and include:

i)        Every person in respect of whom any proceeding has been initiated under the act for the assessment of his income or the income of any other person. These assessees are also called ordinary assessee. It also includes that person to whom tax refund is due or by whom any amount of tax or interest or penalty is payable under this Act.

ii)       A person who is deemed to be an assessee under any provision of the Act. A person who is not only liable for his own income but also for the income of another person is called deemed assessee or representative assessee. E.g., Guardian of minor or a lunatic etc.

iii)     A person who is deemed to be an assessee in default in any of the provision of the Act. Assesses in default is a person who fails to fulfill his statutory obligations. E.g., in case of an employer paying salary, he has to deduct tax at source and deposit the same in the government treasury. If he fails, then he is called assessee in default.

Every person by whom any amount is payable under the Income Tax Act is called assessee. But all person mentioned above is not liable to pay taxes.

A. Following persons are liable to pay income tax if their taxable income’ in a year exceeds the basic exemption limit for the year:

1.       Individuals (including non-residents),

2.       Hindu Undivided Families (HUFs)

3.       Association of Persons (AOPs)/Bodies of Individuals (BOIs) (where the individual shares of the members are known)

4.       Artificial juridical persons, such as deities of temples

5.       Societies and charitable/religious trusts

B. Following persons are liable to pay income-tax irrespective of their income:

1.       All partnership firms (including limited liability partnership firms)

2.       Co-operative societies

3.       Companies

4.       Local authorities

5.       AOP/BOI where shares of the members are indeterminate or unknown.

From the above definition, we can say that every assessee is a person but every person is not an assessee.