Meaning of “Body of individuals”

The meaning of body of individuals under section 2(31) of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of body of individuals.

Meaning of body of individuals defined by court

The phrase ‘body of individuals’ used in section 2(31) of the Income Tax Act came up before various high courts as detailed under :

1. Hon’ble Andhra Pradesh High Court explained the meaning of ‘body of individuals’ while delivering judgment in Deccan wine & general stores vs. CIT [1976] 105 ITR 111 (AP) as under :

Meaning : The expression ‘body of individuals’ should receive a wide interpretation, perhaps not wide enough to include a combination of individuals who merely receive income jointly without anything further as in the case of co-heirs inheriting shares or securities, but certainly wide enough to include a combination of individuals who have a unity of interest but who are not actuated by a common design, and one or more of whose members producer or help to produce income for the benefit of all.

2. Hon’ble Delhi High Court explained the meaning of ‘body of individuals’ while delivering judgment in CIT vs. SAE Head Office Monthly Paid Employees Welfare Trust [2004] 141 taxman 364/271 ITR 159 (Delhi) as under :

Meaning : The term ‘individual’ as used in the act does not mean a single living human being but would include in its ambit a boi constituting a unit for the purposes of the act.

3. Hon’ble Gujarat High Court explained the meaning of ‘body of individuals’ while delivering judgment in CIT vs. Harivadan Tribhovandas [1977] 106 ITR 494 (Guj.) as under :

Meaning : It is possible to attribute any one of the following three meanings to the expression ‘body of individuals’ occurring in the income-tax act, 1961 : (1)   on the same basis as an ‘association of persons’, that is, the members of the body must have joined together for the purpose of producing income;

(2)   a conglomeration of individuals who happened to have come together but who carry on some activity with a view to earn income or profits or gains; and (3)   any conglomeration of individuals whatsoever irrespective of the object which brought them together and irrespective of the activities which they carry on.

It is clear that if the first meaning were to be adopted, that would be the narrowest meaning and adoption of that meaning would mean attributing tautology to the legislature and there would be no difference between an ‘association of persons’ and ‘a body of individuals’. Acceptance of the meaning would mean that the legislature had used the words ‘body of individuals’ in vain to describe one and the same group of individuals.

On the other hand, if the third meaning is accepted, then the principle of noscitur a sociis would be lost sight of. Though the principle of ejusdem generis cannot be applied to the definition of the word ‘person’ occurring in section 2(31), since there is no specific genus to which an individual, a huf, a company, a firm or an association of persons can be said to belong, the principle of noscitur a sociis can certainly apply in the facts of this case.

The body of individuals with which the income-tax act is concerned must be carrying on an activity with a view to earn income because it is only with such a body of individuals that the income-tax act is concerned and again the words ‘body of individuals’ derive colour from the context in which they occur, namely, an ‘association of persons’ and, therefore, the only course open as a matter of interpretation is to attribute the second meaning out of the three meanings set out hereinabove to the words ‘body of individuals’.

The words ‘body of individuals’ occurring in the income-tax act in the definition of the word ‘person’ in section 2(31), therefore, could only mean a conglomeration of individuals who carry on some activity with the object of earning income.

Section 2(31) of Income Tax Act

(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.

Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

In this article, you can get guidance from high courts on the meaning of body of individuals under section 2(31) of the Income Tax Act.

Updated up to Finance Act 2021