TaxTMI 
TaxTMI 
TaxTMI 
Safeguarding the Right of Representative Assessees to the Recover Tax under this act : Clause 305 of the Income Tax Bill, 2025 Vs. Section 162 of the Income-tax Act, 1961
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.... liabilities are discharged even where the person primarily liable is not directly assessed or is otherwise unavailable for assessment. These provisions protect the interests of individuals or entities required by law to act in a representative capacity, such as trustees, guardians, agents, or managers of non-resident persons, by conferring upon them a statutory right to recover taxes paid from the beneficial owner or principal. The legal framework surrounding representative assessees is of significant practical importance, as it balances the interest of revenue collection with the need to ensure that intermediaries or fiduciaries are not unduly burdened by the tax obligations of others. Clause 305 of the Income Tax Bill, 2025, essentially ....
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....istorically, such provisions have been necessary to ensure that tax administration is not frustrated by the absence, incapacity, or non-cooperation of the person primarily liable to tax, especially in trust, estate, and agency relationships. Detailed Analysis of Clause 305 of the Income Tax Bill, 2025 Clause 305 is structured into four sub-clauses, each addressing distinct facets of the representative assessee's rights and obligations. Sub-clause (1): Right to Recover or Retain "Every representative assessee who, as such, pays any sum under this Act, shall be entitled to recover the sum so paid from the person on whose behalf it is paid, or to retain out of any moneys that may be in his possession or may come to him in his represent....
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....so covers persons who "apprehend" that they may be assessed as representative assessees, thus offering a preemptive safeguard. Sub-clause (3): Dispute Resolution and Certificate Mechanism "In the event of any disagreement between such principal and such representative assessee or person with regard to the amount to be so retained as referred to in sub-section (2), such representative assessee or person may secure from the Assessing Officer a certificate stating the amount to be so retained pending final settlement of the liability, and the certificate so obtained shall be his warrant for retaining that amount." This sub-clause provides a statutory mechanism for dispute resolution. If a disagreement arises regarding the quantum to be reta....
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.... typically includes trustees, guardians, agents, etc. * Estimated Liability: The term "estimated liability" is not defined, leaving room for subjective interpretation. The mechanism for estimation is not prescribed, but the certificate process in sub-clause (3) provides a safeguard. * Possession of Monies: The right to retain is limited to monies "in his possession" or that "may come to him" in his representative capacity. The timing and nature of such possession may be contentious in complex fiduciary structures. * Additional Assets: Sub-clause (4) introduces the concept of "additional assets," which could be interpreted broadly. The extent of the representative assessee's liability in relation to such assets may require judicial....
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....ion 162 of the Income-tax Act, 1961 A close reading of Clause 305 and Section 162 reveals substantial similarity, both in structure and substance. However, a few nuanced differences and points for analysis are worth noting. Textual Comparison * Structure: Section 162(1) and Clause 305(1) are virtually identical, establishing the right to recover or retain tax paid. * Section 162(2): Combines the right to retain estimated liability and the certificate mechanism in a single subsection, whereas Clause 305 separates these into sub-clauses (2) and (3) for greater clarity. * Section 162(3) and Clause 305(4): Both limit the recoverable amount to the certificate value, subject to additional assets held. Substantive Comparison and Analysis ....
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....eas of Conflict or Reform * Definition of "Estimated Liability": Both provisions could benefit from a more precise definition or guidance on estimation methodology to reduce disputes. * Procedural Timelines: The process for obtaining a certificate from the Assessing Officer could be streamlined with prescribed timelines to avoid delays and uncertainty. * Scope of Application: As new forms of fiduciary relationships and digital assets emerge, the legislature may need to clarify the application of these provisions to modern contexts. Conclusion Clause 305 of the Income Tax Bill, 2025, reaffirms and clarifies the rights of representative assessees to recover or retain taxes paid on behalf of principals, providing essential protections ....