1axat|on of Compan|es

Company Sec 2(17)

W A company" ls deflned Lo mean Lhe followlng
Any lndlan Company or
Any body corporaLe lncorporaLed under Lhe laws of a
forelgn counLry or
Any lnsLlLuLlon assoclaLlon or a body whlch ls
assessed or was assessable/assessed as a company for
any assessmenL year commenclng on or before Aprll
1 1970 or
Any lnsLlLuLlon assoclaLlon or a body wheLher
lncorporaLed or noL and wheLher lndlan or non
lndlan whlch ls declared by general or speclal order of
Lhe CenLral 8oard of ulrecL 1axes Lo be a company
lndlan Company Sec 2(26)
lndlan company ls formed and reglsLered under Lhe Companles
AcL 1936 and lncludes
A company formed and reglsLered under any law relaLlng Lo
companles formerly ln force ln any parL of lndla oLher Lhan Lhe
SLaLe of !ammu and kashmlr and Lhe unlon LerrlLorles speclfled ln
(e) lnfra
A corporaLlon esLabllshed by or under a CenLral SLaLe or rovlnclal
AcL
Any lnsLlLuLlon assoclaLlon or body whlch ls declared by Lhe 8oard
Lo be a company u/s 2(17)
A company formed and reglsLered under any law ln force ln Lhe
SLaLe of !ammu and kashmlr
A company formed and reglsLered under any law for Lhe Llme belng
ln force ln Lhe unlon LerrlLorles of uadra and nagar Pavell Coa
uaman and ulu and ondlcherry
1he reglsLered offlce ln all Lhe above cases should be ln lndla
uomesLlc Company
W lL means an lndlan company or any oLher company
whlch ln respecL of lLs lncome llable Lo Lax under
Lhe AcL has made prescrlbed arrangemenLs for Lhe
declaraLlon and paymenL of dlvldends wlLhln lndla ln
accordance wlLh secLlon 194
W All lndlan companles are Lherefore domesLlc
companles
W lor oLher companles Lo become domesLlc
companles lL ls essenLlal LhaL Lhe sald company may
have made Lhe prescrlbed arrangemenL for
declaraLlon and paymenLs wlLh lndla of dlvldends
ouL of such lncome
ArrangemenL for declaraLlon and
paymenL of dlvldend
1hree requlremenLs Lo be saLlsfled lnclude
W 1he share reglsLer of Lhe company for all
shareholders should be regularly malnLalned aL lLs
prlnclpal place off buslness ln lndla aL leasL form
Aprll 1 of Lhe relevanL assessmenL year
W 1he general meeLlng for passlng of accounLs of Lhe
relevanL prevlous year and for declarlng dlvldends
ln respecL Lhereof should be held only aL a place
wlLhln lndla
W 1he dlvldends declared lf any should be payable
only wlLhln lndla Lo all shareholders
lndusLrlal Company
Sec 2(8)(c) of Lhe llnance AcL 1983
W Company LhaL ls malnly engaged ln Lhe buslness
of generaLlon or dlsLrlbuLlon of elecLrlclLy or
any oLher form of power or ln Lhe consLrucLlon
of shlps or ln Lhe manufacLure or processlng of
goods or ln mlnlng
W 1he lncome aLLrlbuLable Lo any one or more of
Lhe above llsL ln lncluded ln lLs LoLal lncome of
Lhe prevlous year and ls noL less Lhan 31 of
such LoLal lncome
lndusLrlal Company
SecLlon 2(7)(d) of Lhe llnance AcL 1966
Clrcular no 103 daLed 17
Lh
lebruary 1973 furLher deflnes
an lndusLrlal company as
a A company whlch ls malnly engaged ln Lhe buslness of
generaLlon or dlsLrlbuLlon of elecLrlclLy or any oLher form
of power or ln Lhe consLrucLlon of shlps or ln Lhe
manufacLure or processlng of goods or ln mlnlng even lf
lLs LoLal lncome from such acLlvlLles ls less Lhan 31 of lLs
LoLal lncome and
b A company whlch even Lhough noL malnly so engaged
derlves ln any year 31 or more of lLs lncome from such
acLlvlLles
verdlcL of kerala Plgh CourL ln Lhe case Cochln Company
v Cl1 1978 114 l18 822 also endorses Lhe above
deflnlLlon
Lher olnLs/acLlvlLles
W lollowlng acLlvlLles are held as manufacLure" or
rocesslng" of goods
a) 8ook ubllshlng Clrcular no 347 !uly 1982
b) Mlxlng of dlfferenL Lypes of Lea Lo arlve aL a deslred
blend CA 8anderlan LLd v Cl1 1983 12 1axman
160 (cal)
c) ManufacLure and selllng of carpeLs buL havlng ma[or
source of lncome from sale of lmporL enLlLlemenL
(generaLed by exporL of carpeLs) beeLee (p) LLd v
Cl1 1983 12 1axman 331 (All)
d) roducLlon of clnemaLographlc fllms Clrcular no 24
daLed !uly 23 1969
Lher olnLs/acLlvlLles
W 1allorlng cloLhes nuLook () LLd v Cl1 1983 23
1axman 39 (uelhl)
W Converslon of compuLer cash vouchers lnvolces
eLc lnLo balance sheeL sLock accounL eLc Cl1 v
uaLacons () LLd 1983 21 1axman 341 (kar)
W SorLlng ouL washlng drylng and blendlng wool
Shree Mulchand Co LLd v Cl8 1986 24 1axman
188 (8om)
W undergolng a change ln a commodlLy as a resulL of
some operaLlon (manual or mechanlcal) and as a
resulL a new and dlsLlncL commodlLy emerges
koshy's () LLd v Cl1 1984 18 Laxman 481 (kar)
Company wlLh subsLanLlal lnLeresL of ubllc
Sec 2(18)
1hls llsL lncludes
l wned by CovernmenL/88l A company owned by CovernmenL or
88l or ln whlch noL less Lhan 40 shares (by value) are held by Lhe
CovernmenL or Lhe 88l or a corporaLlon owned by 88l
ll A company reglsLered under SecLlon 23 of Lhe Companles AcL 1936
namely companles for promoLlon of commerce arL sclence rellglon
charlLy or prohlblLlng Lhe paymenL of any dlvldends Lo lLs members
lll A company wlLhouL share caplLal and declared by Lhe CenLral 8oard of
ulrecL 1axes Lo be a company ln whlch Lhe publlc are subsLanLlally
lnLeresLed
lv nldhl or MuLual 8eneflL SocleLy A company whlch carrles on as lLs
prlnclpal buslness Lhe buslness of accepLance of deposlLs from lLs
members and whlch ls declared by Lhe CenLral CovernmenL under
secLlon 620A of Companles AcL Lo be a nldhl or MuLual 8eneflL
SocleLy
Company wlLh subsLanLlal lnLeresL of
ubllc Sec 2(18)
v Company owned by CooperaLlve SocleLy Company ln whlch shares
carrylng noL less Lhan 30 of Lhe voLlng power havlng been alloLLed
uncondlLlonally Lo or acqulred uncondlLlonally by and are LhroughouL
Lhe relevanL prevlous year held by one or more cooperaLlve socleLles
vl LlsLed Companles A Company whlch ls noL prlvaLe company and lLs
equlLy shares are as on Lhe lasL day of Lhe prevlous year llsLed ln a
recognlzed sLock exchange ln lndla
vll ubllc llmlLed company owned by CovernmenL and/or a wldelyheld
company A company whlch ls noL a prlvaLe company and lLs shares
carrylng 30 voLlng power (40 ln case of lndusLrlal companles) have
been alloLLed uncondlLlonally Lo or acqulred uncondlLlonally by and
were LhroughouL Lhe relevanL prevlous year beneflclally held by
Lhe governmenL or
a sLaLuLory corporaLlon or
a company ln whlch Lhe publlc are subsLanLlally lnLeresLed or
any whollyowned subsldlary company
nus Lo rove
W nus Lo rove lf company ls composed
mosLly of famlly members ownlng llon's share
ln share caplLal Lhe onus Lo prove LhaL lL ls a
company ln whlch publlc are subsLanLlally
lnLeresLed wlll be on Lhe assessee Cl1 v Sahu
!aln LLd 1976 103 l18 133 (SC)
W lnvesLmenL Company lL means a company
whose gross LoLal lncome conslsLs malnly of
lncome whlch ls chargeable under Lhe heads
lncome from house properLy" caplLal galns"
and lncome from oLher sources"
W Wldelyheld company A company ln whlch
Lhe publlc are subsLanLlally lnLeresLed
W Closelyheld company A company ln whlch
Lhe publlc are noL subsLanLlally lnLeresLed
1axable lncome and Lax llablllLy
'CompuLaLlon'
SLep 1 AscerLaln lncome under Lhe dlfferenL
heads of lncome
SLep 2 lncome of oLher persons may be lncluded
ln Lhe lncome of Lhe company u/s 60 and 61
SLep 3 CurrenL and broughL forward losses
should be ad[usLed accordlng Lo Lhe provlslons of
secLlons 70 Lo 80 rovlslons of secLlon 79
regardlng seLoff and carry forward of losses of
closely held companles
SLep 4 1he LoLal of lncome so compuLed under
dlfferenL heads ls gross LoLal lncome
SLep 3 ueducLlons from gross LoLal lncome SecLlons
80C Lo 80u
ect|on Nature of Deduct|on
80C
80CCA
80CC8
80lA
80lA8
80l8
80lC
80!!A
80lu
80lL
80!!AA
80LA
uonaLlons Lo charlLable lnsLlLuLlons and funds
uonaLlons for sclenLlflc research or rural developmenL
ConLrlbuLlon LoL pollLlcal parLles
roflLs and galns from lndusLrlal underLaklngs engaged ln lnfrasLrucLure
eLc
roflLs and galns by an underLaklng or enLerprlse engaged ln
developmenL of SLZ
roflLs and galns from cerLaln lndusLrlal underLaklngs oLher Lhan
lnfrasLrucLure developmenL underLaklngs
roflLs and galns of cerLaln underLaklngs ln cerLaln sLaLes
roflLs from Lhe buslness of collecLlng and processlng of blodegradable
wasLe
roflLs of hoLels and convenLlon cenLers
roflLs of underLaklngs ln norLh LasLern SLaLes
LmploymenL of new workmen
lncome of offshore banklng unlLs
SLep 6 Lhe resulLlng ls neL lncome and Lax
llablllLy ls calculaLed as follows
SLep AcLlvlLy
1 llnd ouL Laxable lncome under normal provlslons
2 llnd ouL lncomeLax aL Lhe raLe of 30* per cenL (40 lf lL ls forelgn
company of lncome under (1) supra 1here ls no exempLlon llmlL
3 All surcharge aL Lhe raLe of 10 of (2) 23 ln case of a forelgn
company lf neL lncome exceeds 8s 1 Crore
4 llnd ouL (2) + (3)
3 Add educaLlon cess aL Lhe raLe of 2 of (4) and secondary and hlgher
educaLlon cess aL Lhe raLe of 1 of (4)
6 ueducL Lax rebaLe or Lax credlL under secLlons 86 90 90A and 91L
7 llnd ouL (4) + (3) (6) lL cannoL be less Lhan zero
CompuLaLlon under
Mlnlmum AlLernaLe 1ax
SLep 8 llnd ouL book proflLs
SLep 9 llnd ouL 13 of book proflLs
SLep 10 Add surcharge aL Lhe raLe of 10 23 ln case of
forelgn company of SLep 9 lf book proflLs exceed
8s 1 crore
SLep 11 llnd ouL (9) + (10)
SLep 12 Add educaLlon cess aL Lhe raLe of 2 of SLep 11
and secondary and hlgher educaLlon cess aL Lhe
raLe of 1 of sLep 11
SLep 13 llnd ouL (11) + (12)
Note LhaL Lax llablllLy ls Lhe ouLpuL of SLep 7 or SLep 13
whlchever ls hlgher
Carry forward and seLoff of losses
Sec 79
W SecLlon 79 ls appllcable lf Lhe followlng
condlLlons are saLlsfled
Cond|t|on
1
1he tax payer |s a company |n wh|ch the pub||c are
not substant|a||y |nterested
CondlLlon
2
1he persons beneflclally holdlng 31 of Lhe voLlng
power on Lhe followlng Lwo daLes are dlfferenL
a n Lhe lasL day of Lhe prevlous year ln whlch Lhe
loss was lncurred
b n Lhe lasL day of Lhe prevlous year ln whlch Lhe
company wanLs Lo seL off Lhe broughL forward loss
Mlnlmum AlLernaLe 1ax Sec 113!8