UMN ‘As por Section 2(17) of the Income: tax Act, 1981 (‘the Act’), company moans: () Any Indian Company; or i) Any body corporate incorporated by or under the laws of a country outside India; or (ii) Any institution, association or body which is or was assessable or was assessed as a company for lany assessment year under the Income-iax Act, 1922 or was assessed under this Aci, as a company for any assessment year commencing on or belore April 1, 1970; or (WW) Any institution, association or body. whether incorporated or not and whether Indian or non-indian, which is deciared by general or special order of the GBDT 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 the 1 day of April, 1971 or thereafter) ‘as may be specified in the declaration. Note 1: A statutory corporation established under the Act of Parliament, Government Companies and the State Government companies who carry on a trade or business would also be treated as a company for all purposes of Income tax. RES For the purposes of Income tax, companies can be divided into following categories: Company I t I r tr Tndian Domenie Foreign Widely] [Govelyrela conpery] | company | |_compony Comper company INDIAN COMPANY ‘As per Section 2(26) of the Act, Indian Company means @ company formed and registered under the Companies Aci, 1956 and includes: (a) 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 & Kashmir, and the Union Territories specified in (e) below); (0) Any corporation established by or under a Central, State or Provincial Act; (©) Any institution, association or body declared by the Board to be 2 company under section 2(17) of the Act: (d) In the case of Jammu & Kashmir, any company formed and registered under any law for the time being in force in that State; and (@) In the case of any of the Union Territories of Dadra and Nagar Haveli, Daman and Diu and Pondicherry, a company formed and rogistored undor any law for tho 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 bedy in all cases is in India.DOMESTIC COMPANY Section 2(22A) defines domestic company as an Indian company or any other company which, in respect of its income Fable 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 ‘Thus, all Indian companies are domestic companies. However, 2 nor-Indian company would be a domestic ‘company only if it makes the following prescribed arrangements for the declaration and payment of dividends in Inia: {@) The share register of the company concerned, forall its shareholders, shall be regularly maintained at its principal place of business within india in respect of any assessment year from a date not later than the tirst day of April of such year: (©) The general meeting for passing the accounts of the previous year relevant to the assessment year declaring any dividends in respect therect shall be held only at a place within India; (c) The dividends deciared, if any, shall be payable only within India to all shareho\ders. FOREIGN COMPANY Section 2(23A) dafines foreign company as a company which is not a domestic company. However, all non- Indian companies are not foreign companies as a non-indian company can be a domestic company it it makes the above-mentioned prescribed arrangements for the declaration and payment of dividends in India. COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED (A WIDELY HELD COMPANY) ‘As per Section 2(18), a company is said to be one in which public are cubstantially interestedin the following ‘cases, namely: () tfitis a company owned ty the Government or RBI or in which at least 40% cf the shares, whether singly or taken togeiner, are nel by the Government or FEI of 2 corporation owned by FEI; or (i) Ititis @ company registered under Section 25 of the Companies Act, 1956"; or (i) 1 itis a company, having no share capital and if, having regard to its objects, the nature and Compesition of is membership and other relevant considerations, itis declared by an order of the Central Board of Direct Taxes (CBDT) 10 be a company in which the public are substantially interested: () If itis 2 company which cauties on its 2s is principal business, the business of acceptance of doposts from its membors ard which is declared by tho Central Government undar Soction 620A of th Companiss act, 1956" to bo a Nidh or Mutual Bonoft Sociaty; or () Itt is company in wnich shares carrying atleast 50% ot ihe voing power nave been allotted ‘unconditionally to or aequited uncondlionaly by, and are troughout the relevant previous year beneficially held by, one oF more cooperative soceties; oF (wi itis company which is not a private company as defined in Section cf the Companies Act, 1956” ‘and equity shares cf the compary were, as on the last day ofthe relevant previous year, listed in a recognised siock exchange in India;(vi) itis a company which is not a private company and the shares in the company (other then preierence shares) carrying atleast 50% (40% in case of an Industrial company) ofthe voting power have been alloted unconditionally to, oF acquited unconditionally by, and were throughout the relevant aocountng year benefically held by (a) Government, or (b) a corporation establishment by a Ceniral or State or Provincial Act, or (¢) ary company in which the public are substantialy interested or a wholy owned subsidiary company. ‘CLOSELY HELD COMPANY ‘A Company in which the Publics not substantially nterestedis known as a closely held company. ‘The dstincton between 2 closey held and widely held company is significant rom the following viewpoints Section 220\(e) which deems certain payments as dividend is appicable only to the shareholders of a cbsely held company; and i) A closely held company is allowed o cary forward its business lesses only if the conditions specified in secton79 are satisied DES Incidence of tax depends upon the residential status of @ person. A company may be resident or non- resident in Indi. |As per Section (3), a company is resident in India in any previous year, i (@ tis an indian company; or (during that year, POEM is situated wholly in India; From Assessment Year 2017-18 a foreign company will be resident in India if its Place of Effective Management (POEM) during the previous year is in India. For this purpose, the Place of Effective Management means a place where Key management and commercial decisions that are necessary for the ‘conduct of the business of an entity as a whole are, in substance are mace ‘Therefore if any of the above two tests is not satisfied, the company would be a non-resident in India during that previous yea. ‘According to Section 5(1) of the Act, the total income of a resident company would consist ot (© Income received oF deemed to be received in India during the previous year by or on behalf of such ‘company; or (Income which accrues or arises or is deemed to accrue or arises to it in India ducing the previous year; or (Income which accrues or arises fo it outside India during the previous year, Under Section 5(2) ofthe Act, the total income of a nor-esident company would consist of (@ Income received or deemed to be received in India during the previous year by or on behalf of such company; oF (Income which accrues or atises or is deemed to accrue or aries to it in India during the previous year,