Income Tax Act

Official PDF pages 401–405

SOURCE PDF PAGE 401
is in receipt of such income on behalf of such minor or a person who is
mentally ill or of unsound mind;
( c )   in respect of income which the Court of Wards, the Administrator-General,
the Official Trustee or any receiver or manager (including any person,
whatever his designation, who in fact manages property on behalf of
another) appointed by or under any order of a court, receives or is enti -
tled to receive, on behalf or for the benefit of any person, such Court of
Wards, Administrator-General, Official Trustee, receiver or manager;
( d )   in respect of income which a trustee appointed under a trust declared
by a duly executed instrument in writing whether testamentary or oth -
erwise [including any wakf deed which is valid under the Mussalman
Wakf Validating Act, 1913 (6 of 1913)] receives or is entitled to receive
on behalf or for the benefit of any person, such trustee or trustees;
( e )   in respect of income which a trustee appointed under an oral trust
receives or is entitled to receive on behalf or for the benefit of any person,
such trustee or trustees.
(2) For the purposes of sub-section (1)( d ), a trust which is not declared by a duly
executed instrument in writing [including any wakf deed which is valid under the
Mussalman Wakf Validating Act, 1913 (6 of 1913)] shall be deemed to be a trust
declared by a duly executed instrument in writing if a statement in writing,
signed by the trustee or trustees, setting out the purpose or purposes of the trust,
particulars as to the trustee or trustees, the beneficiary or beneficiaries and the trust
property, is forwarded to the Assessing Officer,—
( a )   where the trust has been declared before the 1st June, 1981, within
three months from that day; and
( b )   in any other case, within three months from the date of declaration of
the trust.
(3) For the purposes of sub-section (1)( e ), “oral trust” means a trust which is not
declared by a duly executed instrument in writing [(including any wakf deed which
is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)] and which is
not deemed under sub-section (2) to be a trust declared by a duly executed instru -
ment in writing.
(4) Every representative assessee shall be deemed to be an assessee for the purposes
of this Act.
Liability of representative assessee.
304.   (1) Every representative assessee, as regards the income in respect of which
he is a representative assessee, shall be subject to the same duties, responsi -
bilities and liabilities as if the income were income received by or accruing to or in
favour of him beneficially and for this purpose,—
( a )   the representative assessee shall be liable to assessment in his own name
in respect of that income and any such assessment shall be deemed to
be made upon him in his representative capacity only; and
( b )   the tax on such income shall, subject to the other provisions contained
in this Chapter, be levied upon and recovered from the representative

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assessee in like manner and to the same extent as it would be leviable
upon and recoverable from the person represented by him.
(2) If any person, in respect of any income is assessable under this Chapter in the
capacity of a representative assessee, then he shall not, in respect of that income,
be assessed under any other provisions of this Act.
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(3) 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.
(4) If only part of the income of a trust is chargeable under this Act, then the pro -
portion of income receivable by a beneficiary from such trust derived from the
chargeable part shall be determined as follows:—
A  
× C,
B
Where,—
A =   the chargeable part of the income of the trust;
B =   the whole income of the trust; and
C =   the income receivable by the beneficiary from the trust.
(5) The Assessing Officer shall have the same remedies in the same manner against
all property of any kind vested in or under the control or management of any rep -
resentative assessee as he would have against the property of any person liable to
pay any tax, whether the demand is raised against the representative assessee or
against the beneficiary direct.
Right of representative assessee to recover tax paid.
305.   (1) 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 representative capacity, an amount equal to the sum so paid.
(2) Any representative assessee, or any person who apprehends that he may be
assessed as a representative assessee, may retain out of any money payable by him
to the person on whose behalf he is liable to pay tax (hereinafter in this section 306
referred to as the principal), a sum equal to his estimated liability under this Chapter.
(3) In the event of any disagreement between such principal and such represen -
tative 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.
(4) The amount recoverable from such representative assessee or person at the time
of final settlement shall not exceed the amount specified in such certificate, except
to the extent to which such representative assessee or person may at such time have
in his hands additional assets of the principal.

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3. —Representative assessees—Special cases
Who may be regarded as agent.
306.   (1) For the purposes of this Act, “agent”, in relation to a non-resident, includes—
( a )   any person in India—
( i )   who is employed by or on behalf of the non-resident; or
( ii )   who has any business connection with the non-resident; or
( iii )   from or through whom the non-resident is in receipt of any income,
whether directly or indirectly; or
( iv )   who is the trustee of the non-resident;
( b )   any other person who, whether a resident or non-resident, has acquired
by means of a transfer, a capital asset in India.
(2) A broker in India who, in respect of any transactions, does not deal directly with
or on behalf of a non-resident principal but deals with or through a non-resident
broker shall not be deemed to be an agent under this section in respect of such
transactions, if the following conditions are fulfilled:—
( a )   the transactions are carried on in the ordinary course of business through
the first-mentioned broker; and
( b )   the non-resident broker is carrying on such transactions in the ordinary
course of his business and not as a principal.
(3) A person shall not be treated as the agent of a non-resident unless he has had an
opportunity of being heard by the Assessing Officer as to his liability to be treated
as such.
(4) For the purposes of this section, “business connection” shall have the meaning
assigned to it in section 9(9)( a ).
Charge of tax where share of beneficiaries unknown.
307.   (1) The income or any part thereof, in respect of the person mentioned in
sections 303(1)( c ) and ( d ) shall be chargeable to tax at the maximum mar-
ginal rate, if—
( a )   such income or such part thereof is not specifically receivable on behalf
or for the benefit of any one person; or
( b )   the individual shares of the persons on whose behalf or for whose
benefit such income or such part thereof is receivable are indetermi-
nate or unknown.
(2) The income or any part thereof as referred to in sub-section (1), shall be charge -
able to tax at the rate applicable to an association of persons as if it were its total
income, if,—
( a )   none of the beneficiaries has any other income chargeable under this
Act exceeding the maximum amount not chargeable to tax in case of an
association of persons, or is a beneficiary under any other trust; or
( b )   such income or part of such income is receivable under a trust declared
by any person by will and such trust is the only trust so declared by him;
or

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( c )   such income or part of such income is receivable under a trust created
before the 1st March, 1970, by a non-testamentary instrument and the
Assessing Officer is satisfied, having regard to all the circumstances
existing at the relevant time, that the trust was created   bona fide —
( i )   exclusively for the benefit of the relatives of the settlor; or
( ii )   exclusively for the benefit of the members of such family, where
the settlor is a Hindu undivided family,
in circumstances where such relatives or members were mainly dependent
on the settlor for their support and maintenance; or
( d )   such income is receivable by the trustees on behalf of a provident fund,
superannuation fund, gratuity fund, pension fund or any other fund
created   bona fide   by a person carrying on a business or profession
exclusively for the benefit of persons employed in such business or
profession.
(3) Subject to the provisions of sub-section (4), where the income in respect of the
person mentioned in section 303(1)( d ) consists of, or includes, profits and gains of
business, tax shall be charged at the maximum marginal rate   on such income or
part thereof.
(4) Where the profits and gains referred to in sub-section (3) are receivable under
a trust declared by any person by will exclusively for the benefit of any relative
dependent on him for support and maintenance, and such trust is the only trust
so declared by him, income or part thereof shall be chargeable to tax at the rate
applicable to an association of persons.
(5) For the purposes of this section,—
( a )   such income or any part thereof shall be deemed as being not specifi -
cally receivable on behalf or for the benefit of any one person unless the
person on whose behalf or for whose benefit such income or such part
thereof is receivable during the tax year is expressly stated in the order
of the court or the instrument of trust or wakf deed, as the case may be,
and is identifiable as such on the date of such order, instrument or deed;
( b )   the individual shares of the persons on whose behalf or for whose
benefit such income or such part thereof is received shall be deemed to
be indeterminate or unknown unless the individual shares of the persons
on whose behalf or for whose benefit such income or such part thereof is
receivable, are expressly stated in the order of the court or the instrument
of trust or wakf deed and are ascertainable as such on the date of such
order, instrument or deed.
Charge of tax in case of oral trust.
308.   (1) Where a trustee receives or is entitled to receive any income on behalf
or for the benefit of any person under an oral trust, then, irrespective of
anything contained in any other provision of this Act, tax shall be charged on such
income at the maximum marginal rate.
(2) For the purposes of this section, “oral trust” shall have the meaning assigned
to it in section 303(3).

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4. —Association of persons and body of individuals
Method of computing a member’s share in income of association of persons
or body of individuals.
309.   (1) For the purposes of this section, sections 310 and 311, an association of
persons or body of individuals shall not include a company or a co-operative
society or a society registered under the Societies Registration Act, 1860 (21 of
1860), or under any law corresponding to that Act in force in any part of India.
(2) In computing the total income of an assessee who is a member of an association
of persons or a body of individuals wherein the shares of the members are determi -
nate and known, the share of a member in the income or loss of such association
or body shall be computed in the following manner,—
( a )   any interest, salary, bonus, commission or remuneration, by whatever
name called, paid to any member in respect of the tax year shall be de -
ducted from the total income of the association or body and the balance
ascertained and apportioned among the members in the proportions in
which they are entitled to share in the income of the association or body;
( b )   the interest, salary, bonus, commission or remuneration referred to in
clause ( a ), shall be,—
( i )   added to the apportioned amount referred to in clause ( a ), if such
apportioned amount is a profit; or
( ii )   adjusted against the apportioned amount referred to in clause ( a ),
if such apportioned amount is a loss,
and the resultant amount shall be treated as the share of the member in
the income of such association or body.
(3) The share of a member in the income or loss of the association or body, as com -
puted under sub-section (2), shall, for the purposes of assessment, be apportioned
under the various heads of income in the same manner in which the income or loss
of the association or body has been determined under each head of income.
(4) Any interest paid by a member on capital borrowed by him for the purposes
of investment in the association or body shall, in computing his share chargeable
under the head “Profits and gains of business or profession” in respect of his share
in the income of the association or body, be deducted from his share.
(5) For the purposes of this section, “paid” means actually paid or incurred accord -
ing to the method of accounting upon the basis of which the profits or gains are
computed under the head “Profits and gains of business or profession”.
Share of member of association of persons or body of individuals in income
of association or body.
310.   (1) Income-tax shall not be payable by an assessee (who is a member of
an association of persons or body of individuals) in respect of his share in the
income of the association of persons or body of individuals computed in the manner
provided in section 309, except in a case referred to in sub-section (2).