TaxTMI 
TaxTMI 
Representative Assessee Liability under India's Income Tax Law : Clause 304 of the Income Tax Bill, 2025 Vs. Section 161 of the Income-tax Act, 1961
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....provides a detailed analysis of Clause 304, dissects its individual sub-clauses, explores its legislative intent and practical implications, and then undertakes a comparative study with the corresponding Section 161 of the 1961 Act, highlighting continuities, changes, and potential impacts. Objective and Purpose The legislative intent behind both Clause 304 and Section 161 is to maintain the integrity of the tax base by ensuring that income is taxed, regardless of the legal arrangements under which it is held or managed. The provisions are designed to: * Prevent tax evasion by ensuring income cannot escape taxation merely because it is held by an intermediary or representative. * Clarify the liabilities and procedural responsibilities of representative assessees. * Provide certainty and clarity regarding assessment, collection, and recovery of tax in representative situations. * Address practical challenges arising from complex trust, estate, or agency arrangements. Historically, these provisions have evolved to close gaps exploited for tax avoidance and to bring India's tax administration in line with international best practices regarding trusts and agency relation....
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....nt clause ensures that once income is assessed in the hands of a representative assessee, it cannot be taxed again in the hands of the same person under any other provision of the Act. This is essential to prevent multiplicity of proceedings and to uphold the principle of certainty in tax law. Sub-clause (3): Direct Assessment of Beneficial Owner "Irrespective of the provisions of this Chapter, the Assessing Officer may directly assess the person on whose behalf or for whose benefit income therein referred to is receivable, or may recover from such person the tax payable in respect of such income." This provision grants the Assessing Officer (AO) the discretion to bypass the representative and proceed directly against the beneficial owner, both for assessment and recovery. This is a significant administrative tool, allowing the AO to address situations where it may be more efficient or necessary to deal directly with the beneficiary, such as in cases of non-cooperation by the representative or where the beneficial owner is easily identifiable and accessible. Sub-clause (4): Apportionment in Case of Partial Chargeability (Trusts) "If only part of the income of a trust is charge....
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....ach property under the representative's control, enhances the efficiency of tax administration and enforcement. Comparative Analysis with Section 161 of the Income-tax Act, 1961 A close reading of Section 161 reveals both similarities and nuanced differences when compared to Clause 304. Section 161(1): Core Principle Section 161(1) is nearly identical in substance to Clause 304(1). Both provide that the representative assessee is subject to the same duties, responsibilities, and liabilities as if the income were his own, and both require assessment in the representative's name in his representative capacity, with tax levied and recovered as though from the beneficial owner. "Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in....
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....Clause 304(5) codifies the AO's right to proceed against property under the representative's management for recovery, regardless of whether the demand is against the representative or beneficiary. Section 161 does not contain an explicit provision to this effect, though similar powers are available under the general recovery provisions of the Act. The express provision in the Bill strengthens the enforcement mechanism. Comparative Analysis Table: Clause 304 vs. Section 161 Issue Section 161 of the Income-tax Act, 1961 Clause 304 of the Income Tax Bill, 2025 Comment General liability of representative assessee Explicitly provided Explicitly provided No substantive change Assessment in representative capacity only Explicitly provided Explicitly provided No substantive change Bar on double assessment Explicitly provided Explicitly provided No substantive change Direct assessment of beneficiary by Assessing Officer Not explicitly provided (see Sec. 166) Explicitly provided Clause 304 clarifies and codifies the power Allocation of taxable income in trusts (formula) Not provided Explicit formula provided Clause 304 introduces clari....