DEFINITIONS: Section 2.

(1A)] agricultural incomemeans (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;

(b) any income derived from such land by (i) agriculture; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rentin-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on

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 so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that (i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation ; (ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation ;

(7) assessee means a person by whom any tax or any other sum of money is payable under this Act, and includes

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits] or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;

(b) every person who is deemed to be an assessee under any provision of this Act ; (c) every person who is deemed to be an assessee in default under any provision9 of this Act

(7A) Assessing Officer means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Directo or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;

(9) assessment year means the period of twelve months commencing on the 1st day of April every year

(10)

average rate of income-tax means the rate arrived at by dividing the

amount of income-tax calculated on the total income, by such total income ;

(11)

block of assets means a group of assets falling within a class of assets

comprising (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, in respect of

franchises or any other business or commercial rights of similar nature, which the same percentage of depreciation is prescribed .

(12A)

books or books of account includes ledgers, day-books, cash books,

account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.

(13) business includes any trade , commerce or manufacture or any adventure or concern in the nature of trade , commerce or manufacture ;

(14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include

(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession ;

(ii) personal effects , that is to say, movable property (including wearing apparel and furniture) held for personal use dependent on him, but excludes by the assessee or any member of his family

(a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. (15) charitable purpose includes relief of the poor, education , medical relief, including watersheds, forests and wildlife and

preservation of environment

preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business , for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:

(17) company means (i) any Indian company, or (ii) anybody 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 the 1st day of April, 1970, or

(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

(22) dividend includes (a) any distribution by a company of accumulated profits , if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;

(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits.

(c)

any distribution made to the shareholders of a company on its liquidation, to the

extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation.

(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits.

but dividend does not include (i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;

(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders .

(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;

(iii) any payment made by a company on purchase of its own shares from a shareholder .

(iv) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company .

(22A) domestic company means an Indian company, or any other company which, in respect of its income liable to tax under this 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 .

2 (24) income includes (i) profits and gains ; (ii) dividend ; (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes.

(iii) the value of any perquisite or profit in lieu of salary (iiia) any special allowance or benefit, other than perquisite , specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;

(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;

(vi) any capital gains . (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society.

(ix)

any winnings from lotteries, crossword puzzles, races including horse races, card

games and other games of any sort or from gambling or betting of any form or nature whatsoever.

(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 .

(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 . (26A) infrastructure capital company means such company which makes

investments by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business of developing and building a housing project referred or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(26B) infrastructure capital fund means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 , established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business of developing and building a housing project , or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;

(29A)

long-term capital asset means a capital asset which is not a short-term

capital asset ;

(29B) long-term capital gain means capital gain arising from the transfer of a longterm capital asset ;

(29C) maximum marginal rate means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual , association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year ;

(31) person includes (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals , whether incorporated or not,

(vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. (42A) short-term capital asset means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer :

Provided that in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India or a unit of a Mutual Fund specified under , the provisions of this clause shall have effect as if for the words thirty-six months, the words twelve months had been substituted.

(42B)

short-term capital gain means capital gain arising from the transfer of a

short-term capital asset .

(43) tax in relation to the assessment year commencing on the 1st day of April of any year , means income-tax and super-tax chargeable under the provisions of this Act and

in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section .

Section 3. Previous Year For the purposes of this Act, previous year means the financial year immediately preceding the assessment year :

Section 4

Charge of income-tax.

(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, ansubjed ct to the provisions , including provisions for the levy of additional income-tax of, in respect of the total income of the previous year person : of every

Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.

Section 5 : SCOPE OF TOTAL INCOME. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which

(a) Is received or is deemed to be received in India in such year by or on behalf of such person; or

(b) Accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) Accrues or arises to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India , the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which

(a) Is received or is deemed to be received in India in such year by or on behalf of such person; or

(b) Accrues or arises or is deemed to accruse or arise to him in India during such year. Section 6 RESIDENCE IN INDIA. For the purposes of this Act, (1) An individual is said to be resident in India in any previous year, if he is in India in that year for a period or periods amounting in all to one hundred and eightytwo days or more; or

(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case , except where during that year the control and management of its affairs is situated wholly outside India.

(3) A company is said to be resident in India in any previous year, if (i) It is an Indian company; or (ii) During that year, the control and management of its affairs is situated wholly in India.

(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is:

(a) An individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more, or

(b) A Hindu undivided family whose manager has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more.

Section 9 .INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. (1) The following incomes shall be deemed to accrue or arise in India :(i) All income accruing or arising, whether directly or indirectly, from any business connection in India, or from any property in India, or from any asset or source of income in India, through the transfer of a capital asset situate in India; (b) In the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export;

(c) In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India;

(d) In the case of a non-resident, being (1) An individual who is not a citizen of India; or

(2) A firm which does not have any partner who is a citizen of India or who is resident in India; or

(3) A company which does not have any shareholder who is a citizen of India or who is resident in India,

no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India;

(ii) Income which falls under the head "Salaries", if it is earned in India; (iii) Income chargeable under the head "Salaries" payable by the Government to a citizen of India for service outside India;

(iv) A dividend paid by an Indian company outside India; (v) Income by way of interest payable by (a) The Government; or (b) A person who is a resident, (c) A person who is a non-resident, where the interest is payable , for the purposes of a business or profession carried on by such person in India;

(vi) Income by way of royalty payable by (a) The Government; or (b) A person who is a resident. (c) A person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India, or for the purposes of making or earning any income from any source in India :

(vii) Income by way of fees for technical services payable by (a) The Government; or (b) A person who is a resident.

(c) A person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India :