ASSESSMENT OF VARIOUS

ENTITIES.
-Khushi Multani
-Mittal Bora
-Sakshi Bagul
-Umama Pathan
-Siddhesh Kajale
-Piyush Lokwani
Introduction to Assessment:
 An assessment occurs when an asset's value must be determined for the
purpose of taxation.
 Some assessments are made annually on certain types of property, such as
homes, while others may be made only once.
 For example, homes are often valued every three or four years according to
their physical condition and comparable values of surrounding residences.
 The most popular form of assessment is done on properties in order to
calculate the amount of property tax owed to a municipality, township or
county. 
 In some areas, the assessed value is the market value, but in others, the
market value is multiplied by an assessment rate to determine the assessed
value.
Various Entities:
Entities are commonly grouped into:
1. Charitable Trusts,
2. Partnerships (limited, general and limited liability partnerships),and
3. Corporations, along with income trusts and limited liability companies.
(Co-operative Societies)

Thus, Assessment of various entities means that it is a clearly defined

economic unit that isolates the taxation of certain transactions from other
subdivisions or taxation entities. Assessment of various entities must have a
separate set of books or records detailing the assets and liabilities than those of
the owner.
Assessment of Partnership Firms:

 “ Partnership is the relationship between persons who have agreed to

share the profits of a business carried on by all or any of them.”
 Firms are assessed as a separate entity, as per section 2(31) definition of
the person includes firm. Therefore assessment of the same is done
separately.
 There are certain conditions which are required to be satisfied by
partnership firm to be assessed as a firm and for claiming deductions of
interest , salary to the partners.
 Conditions are mentioned in section 184 of the act.
 Partnership firms in India can be divided into two categories
namely, registered partnership or unregistered partnership.
 Partnership firms are liable to pay income tax at the rate of 30%
of total income. In addition to the income tax, a partnership
firm is liable to pay income tax surcharge on the amount of
income tax at the rate of 12%, when total income exceeds Rs.1
crores. In addition to the income tax and surcharge, a
partnership firm must pay education cess at 2%and secondary
higher education cess at 1%.
 The share of the partner in the income of the firm will exempt
under section 10(2A).
While calculating the income tax applicable for a partnership firm, it is important to note
that the following types of expenses paid by the partnership firm to the partners are not
allowed as deductions:
– Salary, bonus, commission or remuneration paid to non-working partners.

– Remuneration or interest paid to the partners which are not in accordance with the terms
of the partnership deed.
– If remuneration or interest paid to the partners are in accordance with the terms of the
partnership deed but they relate to any period prior to the date of the partnership deed.
In addition to the above, interest paid to partners is in accordance with the terms of the
partnership deed should not exceeds 12% per annum.
Also, remuneration paid to partners should be in accordance with the terms of the
partnership deed and should not exceeds the following permissible limit:
– On first Rs. 3 Lakhs of book profit or in the case of loss – Rs. 1,50,000 or 90% of book
profit, whichever is more.
– On the balance of the book profit – 60% of book profit.
Assessment of Partnership Firms:
1. A firm shall be assessed as a firm for the purposes of this Act, if-
(i) the partnership is evidenced by an instrument; and
(ii) the individual shares of the partners are specified in that instrument.
2. A certified copy of the instrument of partnership referred to in sub- section (1) shall
accompany the return of income of the firm of the previous year relevant to the assessment
year commencing on or after the 1st day of April, 1993 , in respect of which assessment as a firm
is first sought.
Explanation.- For the purposes of this sub- section, the copy of the instrument of partnership
shall be certified in writing by all the partners (not being minors) or, where the return is made
after the dissolution of the firm by all persons (not being minors) who were partners in the
firm immediately before its dissolution and by the legal representative of any such partner who
is deceased.
3. Where a firm is assessed as such for any assessment year, it shall be assessed in the same
capacity for every subsequent year if there is no change in the constitution of the firm or
the shares of the partners as evidenced by the instrument of partnership on the basis of
which the assessment as a firm was first sought.
4. Where any such change had taken place in the previous year, the firm shall furnish a
certified copy of the revised instrument of partnership along with the return of income for
the assessment year relevant to such previous year and all the provisions of this section
shall apply accordingly.
5. Notwithstanding anything contained in the foregoing provisions of this section, where,
in respect of any assessment year, there is on the part of a firm any such failure as is
mentioned in section 144, the firm shall not be assessed as such for the said assessment
year and, thereupon, the firm shall be assessed in the same manner as an association of
persons, and all the provisions of this Act shall apply accordingly.
6. The application shall be made before the end of the previous year for the assessment year in
respect of which registration is sought: Provided that the Assessing Officer may entertain an
application made after the end of the previous year, if he is satisfied that the firm was
prevented by sufficient cause from making the application before the end of the previous year.
7. The application shall be accompanied by the original instrument evidencing the
partnership, together with a copy thereof: Provided that if the Assessing Officer is satisfied
that for sufficient reason the original instrument cannot conveniently be produced, he may
accept a copy of it certified in writing by all the partners (not being minors), or, where the
application is made after the dissolution of the firm, by all the persons referred to in clause (b)
of subsection (3), to be a correct copy, or a certified copy of the instrument; and in such cases
the application shall be accompanied by a duplicate copy of the original instrument.
8. The application shall be made in the prescribed form and shall contain the prescribed
particulars.
 9. Where registration is granted [or is deemed to have been granted] to any firm
for any assessment year, it shall have effect for every subsequent assessment year:
Provided that-
 There is no change in the constitution of the firm or the shares of the partners as
evidenced by the instrument of partnership on the basis of which the registration
was granted; and
The firm furnishes, before the expiry of the time allowed under
[sub- section (1) of section 139] for furnishing the return of income for such
subsequent assessment year, a declaration to that effect, in the prescribed form
and verified in the prescribed manner, so, however, that where the Assessing
Officer is satisfied that the firm was prevented by sufficient cause from furnishing
the declaration within the time so allowed, he may allow the firm to furnish the
declaration at any time before the assessment is made.
10. Where any such change has taken place in the previous year,
the firm shall apply for fresh registration for the assessment year
concerned in accordance with the provisions of this section.
" Restored to their original provision by the Direct Tax Laws
(Amendment) Act, 1989.”
Earlier, the chapter sub- heading and, sections 184, 185 and 186
were substituted by the Direct Tax Laws (Amendment) Act, 1987 ,
with effect from the same date.
 Assessment of Co-operative Societies:

Co-operative society is a special type of business organization different from other forms of organization.
It is a special form in which people voluntarily associate together on a basis of equality for the promotion
of common interests.
Thus, following characteristics emerge from the definition –
1. Open membership
2. Voluntary Association
3. State Control
4. Source of Finance – usually from members themselves
5. Democratic Management
6. Limited interest in Capital
7. Distribution of surplus
8. Self help through mutual co-operation
Section 2(19) of Income Tax Act, 1961:
“ Co-operative society means a co-operative society registered under the
Co-operative Societies Act, 1912 or under any other law for the time
being in force in any State for the registration of co-operative societies. “
However, it is assessable as ‘person’ as defined u/s. 2(31) of Income Tax
Act, 1961.
The co-operative society would be assessed in the manner or AOP or
BOI which is a person under 2(31).
Based on activities undertaken by a co-operative society, they are classified as under –
Agricultural Marketing Society
Consumer Society
Central Bank – Co-operative Bank as defined in State Laws
Crop Protection Society
Farming Society
General Society
Housing Society
Federal Society
Irrigation Society
Process Society
Producers’ Society
Resource Society
Provisions for Taxation of a Cooperative
Society:

 A Cooperative Society is a taxable entity under the Income Tax Act, 1961. A Cooperative
Society under the Act is to be treated as an association of persons (AOP), which is included in the
definition of 'person' under the Income Tax Act, 1961.
 Even though, for taxation purposes, the status of a cooperative society is to be taken as an
Association of Persons, the section 67A and section 86 of the Act have been excluded from
application to the members of society.
 The amount of income tax computed in accordance with the provisions of paragraph B , shall in
the case of every cooperative society, be increased by a surcharge. The rate of surcharge is
prescribed in each of the Finance Acts.
 The Cooperative Societies are entitled to several concessions, in the computation of their taxable
income. Besides, they also enjoy the benefit of concessional rate of tax on their chargeable
income under the annual Finance Act.
 As per Wealth Tax Act [Section 3(1)], only individuals, Hindu undivided families and companies
are liable to wealth tax. Thus, no wealth tax is charged in the case of cooperative society.
Compute the Taxable Income for
Cooperative Society:
 First compute the total income under the different heads i.e. income from house
property, profits or gains of business or profession, capital gains, and income from
other sources, ignoring the prescribed income exemptions. Thus, "gross total
income" is obtained.

 Now, from the amount, the permissible deductions under the Income Tax Act are
made.

 To the 'net income' so arrived at, the 'rates of tax' as per the Finance Act for the
respective year is applicable to cooperative societies.

 Now to the amount of tax, percent of income tax as surcharge prescribed in the
Finance Act is added.

 From the tax liability so determined, the amount of 'rebate' in the Act is deducted.
Rate of Tax:
 Surcharge is 10% of income-tax if net income exceeds Rs. 1
crore. It is subject to marginal relief (in the case of a co-
operative society having a net income of exceeding Rs. 1 crore,
the amount payable as income tax and surcharge shall not
exceed the total amount payable as income-tax on total income
of Rs. 1 crore by more than the amount of income that exceeds
Rs. 1 crore).

 Education cess - It is 2%of income-tax and surcharge.

 Secondary and higher education cess : It is 1% of income-

tax and surcharge.
Rate of Tax:
Taxable Income Existing Tax
Slab (Rs.) Rates

0-2.5 Lakh Exempt

2.5-5 Lakh 5%

5-7.5 Lakh 20%

7.5-10 Lakh 20%

10-12.5 Lakh 30%

12.5-15 Lakh 30%

Above 15 Lakh 30%

Exemptions and Deductions granted to the
Cooperatives under the Income Tax Act:

Exemptions :-
 It includes certain classes of income which do not form part of total income
and are exempted from income-tax. These are excluded from the computation
of gross total income of an assessee. A return of income is also not to be filled
for them. Such types of income fall under Chapter III of the Income Tax Act.
Some of the permissible exemptions provided are:-
 Exemption of profits and gains from a new industrial undertaking in a free
trade zone for ten years[Section 10A].
 Exemption of the profits and gains for ten years from a 100% export oriented
undertaking [Section 10B],etc.
 Deductions :-
 It includes certain classes of income which are included in computing the
total income of an assessee but are exempted from income-tax as they are
basically deductions to be made in computing total income. A return of
income is required to be filled for them. Such types of income fall under
Chapter VI-A (Sections 80A to 80U) of the Income Tax Act. Some of the
permissible deductions provided are:-
 As per Section 80A, in computing the total income of an assessee, the
deductions specified in Section 80C to 80U shall be allowed from his gross
total income.