Artificial Juridical Person (AJP) iaw Clause (vii) of Section 2(31) of the Income Tax Act, 1961

 

Clause (vii) of Section 2(31) of the Income Tax Act, 1961 defines an "Artificial Juridical Person" (AJP). This serves as a catch-all category to ensure that any entity earning income that does not fit into standard business definitions is still legally captured under the Indian tax net. [1, 2, 3]

The Legal Text

Under Section 2(31), the statutory definition of a "person" includes seven distinct categories. Clause (vii) explicitly states: [1]

"every artificial juridical person, not falling within any of the preceding sub-clauses." [1]

An Explanation attached to the section notes that an Artificial Juridical Person is deemed to be a person whether or not it was established with the object of deriving income, profits, or gains. [1, 2]

Key Characteristics of an AJP

• Not a Natural Person: They lack physical, human existence but possess a separate legal persona given by law.
• Right to Sue & Own Assets: An AJP can own property, maintain bank accounts, and sue or be sued in its own name.
• Residuary Nature: An entity is only categorized here if it cannot be classified as an Individual, HUF, Company, Firm, AOP/BOI, or Local Authority. [, 2, 3]

Practical Examples of an AJP

The most common entities assessed under clause (vii) include:

1. Deities and Idols: Hindu deities are legally recognized as juristic persons capable of holding property (e.g., Tirupati Temple trust assets).
2. Public Corporations: Statutory bodies established under specific acts of Parliament that do not qualify as standard companies.
3. Bar Councils: State and national legal councils.
4. Universities: Public universities (e.g., Delhi University) that generate independent revenue through fees or investments.

Tax Filing Requirements

• Tax Form: AJPs cannot use normal individual forms. They must file their taxes using ITR-5.
• Tax Rate: They are generally taxed at the flat rates or slab structures applicable to an Association of Persons (AOP), subject to standard tax surcharges. [, 2, 3]