Rights of a representative assessee :

Right to recover tax: Section 162 grants to every representative assessee the right to recover the tax paid by him as a result of such assessments. Accordingly, every representative assessee who pays any sum (which would include not only the tax but also the interest, fine and/or penalty, if any,) is statutorily entitled to recover the amount paid by him from the person/s on whose behalf the payment is made by him in his representative capacity. He is also entitled, if it is necessary to do so, to retain out of any moneys that may be in his possession or may come to him in his representative capacity the amount equal to the payment of tax or other sum made by him. In the event of any disagreement between the principal and the representative assessee in regard to the amount to be so retained, the representative assessee is entitled to apply to the Assessing Officer to secure a certificate from him specifying the amount to be so retained pending the final settlement of his liability to tax.

Right to agitate assessment as agent: The question whether, in any particular case, the taxpayer in India could be assessed as the agent of a non-resident or not is essentially a question of law. Thus, the liability to be assessed arbitrarily or unreasonably, could be challenged in the court through a writ or other appellate proceedings.

Quite often the Indian company is treated as the representative assessee for the foreign technicians of the collaborators who visit India and such a situation becomes necessary by the fact that before the technicians leave India they have to discharge the liability to tax in India and obtain tax clearance certificate from the income-tax authorities. Often it becomes difficult for them to fulfil all the obligations and the tax authorities also find it diffic ult to quantify the liability which has to be discharged by the technicians before they leave India. In such cases the Indian enterprise executes a guarantee bond in favour of the income-tax department undertaking to discharge the liability to tax which may be found to become due from the employee leaving India. While executing such a guarantee the Indian company also refunds in certain cases the amount of tax which might have been already deducted at source to the foreign technicians in the assessment of the technicians. Consequently, if the Assessing Officer takes a view that the exemption was not assessable and he in turn passes an order of assessment raising a demand against the foreign technician by treating the Indian company as the representative assessee of the foreign technician, the Indian enterprise becomes liable to pay the tax demanded from it.

Criteria for assessment as agent: The assessment can be made either on the representative assessee or the non-resident principal to him. The CBDT, in its Circular No.157 dated 26.12.1974, has clarified that “once the choice is made by the department to tax either the trustee or the beneficiary, it is no more open to the department to go behind it and assess the other at the same time.”