Income from Employment, Section 17, Direct Taxes Code, 2009.
Please focus your attention about the word “Person”
The following lines are from 4.7, “Scope of total Income”, Chapter-IV of “Discussion Paper on Direct Taxes Code 2009”
The 1961 Act provides for an inclusive definition of the word “Person”. It includes an individual, HUF, company, firm, association of persons, body of individuals, local authority and artificial person.
Taxable entities like co-operative society, any other society, non-profit organization and private discretionary trust are assessed as association of persons.
Similarly, the institution of Government, though otherwise exempt from tax in respect of its own income, is required to fulfill certain obligations in terms of withholding of tax and filing of information. In the DIRECT TAXES CODE, Government, trust, co-operatative society, any other society and any non-profit organization will be included in the definition of “Person”.
Now, let us go to Section 19 of the Direct Taxes Code, 2009, Income from Employment. Here, it follows:
Section 19. The income derived by a person, from any employment shall be computed under the head “Income from employment”.
Please under line the word “person”, in the above Section 19.
Should this sentence be as “The income derived by a person, from any employment shall be computed under the head “Income from employment”?
Or
Should it be “The income derived by an individual, from any employment shall be computed under the head “Income from employment”?
Under line the words “an individual”.
Please recollect that the definition of the word “person” includes an individual, HUF, company, firm, association of persons, body of individuals, local authority and artificial person.
May I understand, here, the word “Person” stands only for an individual alone and not any HUF, Company, Firm, Association of persons, Body of Individuals, Local Authority and artificial persons (In the DIRECT TAXES CODE, Government, trust, co-operatative society, any other society and any non-profit organization will be included in the definition of “Person” )?
An attempt needs to avoid this ambiguity, which I failed to notice even (a) in the “Discussion paper on Direct Taxes Code 2009” which very neatly drafted avoiding the reference to the word “Person”, but referred an individual twice as “employee” in 7.8 of “Computation of Income From Employment”, Chapter-VII. and (b) “Revised Discussion Paper on Direct Taxes Code Issued on 15th June, 2010” does not carry any reference to either “Person” or “an individual ( as an employee ) “.
Sec 284(96) of Direct Taxes Code, 2009 is clear in its words that “ Employer” means an entity which controls and directs an individual under an express or implied contract of employment and is obligated to pay compensation to him.
So an individual alone can be an employee. But not others (HUF, company, firm, association of persons, body of individuals, local authority and artificial person) who also come in the definition of the term “Person”.
It is known to all of us that there should exist an employer – employee relationship between the payer and the payee.
As “an employee”, except an individual, can we think of any others included in the definition of “person”?
Let me snatch the clarity about this in the Direct Taxes Code, 2009, through the cooperation of the readers of this article.
From
Venkateswara Rao Sapare,
CAclubindia
