Section 162(2)

Section 162(2) — the law in short

What the courts have decided on section 162(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.163: who may be treated as the agent of a non-resident, the broker proviso, and the s.163(2) hearing that cannot be skipped CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer wants to treat my company as the agent of a foreign supplier because we have dealings with it. On what basis can he, and what am I entitled to before he does it?
  Section 163(1) defines 'agent', in relation to a non-resident, as including any person in India who is employed by or on behalf of the non-resident; or who has any business connection with the non-resident; or from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or who is the trustee of the non-resident — and it includes also any other person, whether resident or non-resident, who has acquired by means of a transfer a capital asset in India. Section 163(2) is a hard condition precedent: 'No person shall 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.' The Year 2023 and Year 2025 pages both carry an Explanation providing that for the purposes of sub-section (1) the expression 'business connection' has the meaning assigned to it in Explanation 2 to section 9(1)(i); it is on neither of the two earlier pages read, so it was inserted after 2001.
• Statutory position — s.162: the representative assessee's right to recover and to retain, and the Assessing Officer's certificate that caps his exposure CBDT Circulars & InstructionsCuts both ways
  I am about to be treated as the agent of a non-resident and I still hold money payable to him. Can I hold that money back against the tax, and how do I stop the Department later saying I should have retained more?
  Yes, and section 162(2) is available to you before any order is made against you — it applies to 'any representative assessee, or any person who apprehends that he may be assessed as a representative assessee'. Such a person may retain, out of any money payable by him to the principal, a sum equal to his estimated liability under Chapter XV; and if the principal disputes the amount, he may secure from the Assessing Officer a certificate stating the amount to be so retained pending final settlement, and that certificate 'shall be his warrant for retaining that amount'. Section 162(1) gives the separate right, after payment, to recover what he has paid from the person on whose behalf it was paid, or to retain an equal amount out of moneys in his possession or coming to him in his representative capacity. Section 162(3) is the protection people miss: the amount recoverable from him at final settlement shall not exceed the amount specified in the certificate, except to the extent that he then has in his hands additional assets of the principal.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.