Section 162

Section 162 — the law in short

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

• Statutory position — s.161(1) and (2): the representative assessee is taxed 'in like manner and to the same extent' as the person represented, and cannot be assessed under any other provision CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has assessed our trust in one order on the whole of the trust income at slab rates of its own. The shares of the beneficiaries are fixed and known. Is that how section 161 works?
  No. Section 161(1) makes the representative assessee liable to assessment in his own name, but it deems that assessment to be made upon him in his representative capacity only, and it caps the charge: the tax 'shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him'. Where the shares are determinate the measure of the trustee's liability is therefore the liability of each beneficiary separately, not a single composite charge on the trust. Section 161(2) is the other half of the protection: where a person is assessable under Chapter XV in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of the Act.
• 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.
• Statutory position — s.166 and s.167: the Department may assess the beneficiary direct, and s.167 is about remedies against property, NOT a bar on double taxation CBDT Circulars & InstructionsCuts both ways
  The Department has assessed our trustee under section 161 and has now issued a notice to me as beneficiary on the same income. Which section stops it doing both, and is it section 167?
  It is not section 167. Section 166 is the enabling provision: 'Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income.' Section 167 is headed 'Remedies against property in cases of representative assessees' and does something quite different: it gives the Assessing Officer the same remedies against all property of any kind vested in or under the control or management of a representative assessee as he would have against the property of any person liable to pay tax, and in as full and ample a manner, 'whether the demand is raised against the representative assessee or against the beneficiary direct'. It is a recovery-reach provision in the Revenue's favour, not a taxpayer protection. The bar on taxing the same income twice comes from elsewhere: from section 161(2), from the Central Board of Direct Taxes' own instruction of 24 February 1967, and from the case law on the exercise of the option.

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.