Company Taxation-Meaning and Definition

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Mrs. Guzdar received certain amounts as dividend in respect of shares held by her in a tea company. Under the Income-Tax Act, agricultural income is exempt from payment of income-tax. As income of a tea company is partly agricultural, only 40% of the company’s income is treated as income from manufacture and sale and, therefore, liable to tax.

This definition does not clearly point out the meaning of a company. In order to understand the meaning of a company, let us see the definitions as given by some authorities. A company shall apply for registration of modifications with the original company registration authority. Small companies often serve a small market area or small section of the society like a convenience store or department store functioning in rural township. They have small area for operating business.They do not have to handle business out of states or countries as the activities are confined to a single area. Turnover which does not exceed INR 2 Crore or such higher amount which may be prescribed by the Government, but shall not be more than INR 100 Crores, as per the profit and loss account pertaining to the immediately preceding financial year.

3 Artificial person

A company is an association of many persons who contribute money or Money’s worth to common stock and, employed for a common purpose. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it belongs are members.

  • 12] – As per section 12, a company shall have its name printed on hundies, promissory notes, bills of exchange and such other documents as may be prescribed.
  • He converted his business into a Limited Company— Salomon & Co.
  • A smaller company may outperform a large one with its flexibility and versatility.

Sense means an Association of persons United for a common object. Accordingly, the term is used to represent an Association formed to carry on some business for profits or to promote art, science, etc. Such Association may or may not be incorporated according to law. In common law, a company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives of its members.

Accordingly, the suit filed by the company to recover a trade debt was dismissed on the ground that such payment would amount to trading with enemy. The assessee, in this case was a millionaire earning huge income by way of dividend and interest. He formed four private companies and transferred his investments to each of these companies in exchange of their shares.

company in English

Mrs. Guzdar claimed that the dividend income in her hands should be treated as agricultural income up to 60%, as in the case of a tea company, on the ground that the dividends received by shareholders represented the income of the company. It is a kind of company that is mentioned in Section 2 of the Companies Act, 2013. Where the members’ liability is not capped, the company is referred to as an unlimited liability company. A member of such a corporation is liable for the company’s debts in relation to his stake in it.

meaning of company

Thus, where an officer of a company signs on behalf of the company any contract, bill of exchange, hundi, promissory note, cheque or order for money, such person shall be personally liable to the holder if the name of the company is either not mentioned, or is not properly mentioned. However, a private company is required to put certain restrictions on the transferability of its shares but the right to transfer is not taken away absolutely even meaning of company in case of a private company. Held that the mere fact that someone was the director of the company was no impediment to his entering into a contract to serve the company. If the company was a legal entity, there was no reason to change the validity of any contractual obligations which were created between the company and the deceased. The contract could not be avoided merely because ‘L’ was the agent of the company in its negotiations.

Company meaning, definition, advantage, disadvantages

And the legal entity of Company is separate from the entity of its members. This is the reason that the rights and liability of Company are separate from those person by whom the Company has been created. The word Company has no strictly technical or legal meaning . It may be described to imply an association of persons for some common object or objects . The word Company , in simple term , may be described to mean a voluntary association of person who have come together for carrying on some business and sharing the profits there from.

The number of shareholders required for a company to be deemed a private company is two, and it is explicitly stated that two members collectively owning a single share shall be counted as one shareholder, not two. Ltd.’ at the end of a company’s name makes it possible to identify it as a private company. A company is basically an artificial person — also known as corporate personhood— in that it is a separate entity from the individuals who own, run, and support its day to day operations. Companies are generally formed to make a profit from business activities, although some may be classified as non-profit organisations. It is difficult to deal with all the cases in which courts have lifted or might lift the corporate veil.

Meaning Summary

Only if they refuse to buy within the stipulated period that they can be sold to the outsiders. Shareholders are not, in the eyes of the law, part owners of the undertaking. In India, this principle of separate property was best laid down by the Supreme Court in Bacha F. Guzdar v. CIT, Bombay . The Supreme Court held that a shareholder is not the part owner of the company or its property, he is only given certain rights by law, for example, to vote or attend meetings, or to receive dividends. If the guarantee company also has share capital, the liability of each member shall be determined in terms of not only the amount guaranteed but also the amount remaining unpaid on the shares held by a member. The separate legal personality of the company is the bedrock of the Company Law …… – S.A.E. Ltd. v. E.I.D. Parry Ltd. 18 SCL 481 (Mad.).

With the assistance of Merger & Acquisitions, a firm entering the industry and market segments with a well-known company has a solid reputation and has a loyal customer base. Supreme Court also decided that the citizen’s rights and recognition of citizenship cannot be granted to a company via its members. 2) Formality and cost of Incorporation are an over the top expense.

It was held that since the defendant in fact controlled the company, its formation was a mere ‘cloak or sham’ to enable him to break his agreement with the plaintiff. Accordingly, an injunction was issued against him and against the company he had formed restraining them from soliciting the plaintiff’s customers. 4.2 Prevention of fraud or improper conduct – Where the medium of a company has been used for committing fraud or improper conduct, courts have lifted the veil and looked at the realities of the situation. 4.2 Protection of revenue – The separate entity of a company may be disregarded where revenue of the State is at stake. The directors of a railway company which had fully exhausted its borrowing powers advertised for money to be lent on the security of debentures, ‘W’ lent £500 upon the faith of advertisement and received a debenture.

The liability of members is limited by shares owned by them paying the nominal value of the shares held. Advantages of doing business under the corporate form of organisation. A full stop company being a separate person is the owner of its assets and bound by its liabilities.

Transferability of shares – Earlier when JS(joint-stock) companies were established, the object was that the shares should be capable of being easily transferred. Provision of statutes gives expression to this principle by providing that the shares or other interest of any member are transferable in the manner provided by the articles of the company. Common Signia or seal – A company is only a juristic person and can only act through its agents and all such contracts entered into by such agents must be under the seal of the company.

A Shelf Company/corporation is a company, which is a duly registered/incorporated company as defined under the Companies Act, or under any other previous company law. In respect of which the company has already received the Certificate of Incorporation, but the company has not started its commercial operation. Also, the aforementioned provision of illegal association doesn’t apply to chit funds, joint Hindu families, and stock exchanges. Income tax is levied in the money of illegal association.

‘L’ was a qualified pilot also and was appointed as the chief pilot of the company under the articles and drew a salary for the same. While piloting the company’s plane he was killed in an accident. As the workers of the company were insured, workers were entitled for compensation on death or injury. The question was while holding the position of sole governing director, could ‘L’ also be an employee/worker of the company. A company must be incorporated or registered under the Companies Act. Minimum number of members required for this purpose is seven in the case of a ‘public company’ and two in the case of a ‘private company’.