Section 306 — Who may be regarded as agent. Successor to s.163 of the 1961 Act.
Section 306 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) defines who may be regarded as an "agent" in relation to a non-resident for the purposes of the Act. Clause (a) includes any person in India who is employed by or on behalf of the non-resident, who has any business connection with him, from or through whom the non-resident receives any income whether directly or indirectly, or who is the trustee of the non-resident. Clause (b) includes any other person, whether resident or non-resident, who has acquired by means of a transfer a capital asset in India.
Sub-section (2) carves out a broker. A broker in India who, for particular transactions, does not deal directly with or on behalf of a non-resident principal but deals with or through a non-resident broker is not deemed an agent for those transactions, if the transactions are carried on in the ordinary course of business through the first broker and the non-resident broker is carrying on such transactions in the ordinary course of his business and not as a principal.
Sub-section (3) is the procedural safeguard: 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 so treated. Sub-section (4) gives "business connection" the meaning assigned in section 9(9)(a).
A non-resident may have income arising in India and no presence the Department can proceed against, so the Act attaches the assessment to a person in India through whom the income passes or who has a connection with him. Because that exposes a person to liability for someone else's tax, sub-section (3) requires he be heard first.
The categories in sub-section (1)(a) do not require an appointment as agent — a business connection alone, or receipt of the non-resident's income through you, is enough. Clause (b) is wider in one respect: it is not limited to a person in India, and it catches a person who has acquired a capital asset in India by transfer, which is how a purchaser can be made the agent of a non-resident seller. The word "includes" means the list is not closed. The real protection is sub-section (3), which is unqualified. The broker exclusion in sub-section (2) is transaction-specific and needs both conditions.
A non-resident sells shares of an Indian company to a resident buyer. Because the buyer has acquired a capital asset in India by means of a transfer, sub-section (1)(b) brings him within the definition of agent in relation to that non-resident. Before he can be treated as the agent and assessed as such, sub-section (3) requires that the Assessing Officer give him an opportunity of being heard on his liability to be so treated.
You meet it in a notice from an Assessing Officer proposing to treat you as the agent of a named non-resident and asking why you should not be so treated — the hearing sub-section (3) requires — and then in the assessment made on you in that representative capacity.
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.
any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India
See the full 1961 to 2025 concordance.
See the circulars index.