Meaning of “Firm”

The meaning of firm 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 is an excerpt of the court’s order in which the Hon’ble Supreme Court tried to explain the meaning of firm.

Meaning of firm defined by court

The phrase ‘firm’ used in section 2(31) of the Income Tax Act came up before hon’ble Supreme Court in CIT Vs. R.M. Chidambaram Pillai [1977] 106 ITR 292 (SC) and it explained.

Meaning: Firm’ is a collective noun, a compendious expression to designate an entity, not a person. In income-tax law a firm is a unit of assessment by special provisions but is not a full person.

Section 2(31) of Income Tax Act

2(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 the guidance from supreme court on the meaning of firm under section 2(31) of the Income Tax Act.

Updated up to Finance Act 2021.