2.—Representative assessees—General provisions

Representative assessee.

303(1)

For the purposes of this Act, “representative assessee” means—

• (a) in respect of the income of a non-resident specified in section 9, the agent of the non-resident, including a person who is treated as an agent under section 306;
• (b) in respect of the income of a minor or a person who is mentally ill or of unsound mind, the guardian or manager who is entitled to receive or 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, by whatever name called, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled 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 otherwise (including any wakf deed which is valid under the Mussalman Wakf Validating Act, 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.

303(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) 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.

303(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) and which is not deemed under sub-section (2) to be a trust declared by a duly executed instrument in writing.

303(4)

Every representative assessee shall be deemed to be an assessee for the purposes of this Act.

Explanation

Section Summary:

This section defines who qualifies as a "representative assessee" under the Income Tax Act. A representative assessee is a person or entity responsible for managing or receiving income on behalf of another individual or entity who cannot manage their own income due to specific circumstances (e.g., non-residents, minors, mentally ill individuals, or trusts). The representative assessee is treated as the taxpayer for compliance purposes.

Key Changes:

1. Clarification of Representative Assessee Roles: The section explicitly identifies who qualifies as a representative assessee, including agents of non-residents, guardians of minors or mentally ill individuals, court-appointed managers, and trustees (both written and oral trusts).
2. Treatment of Oral Trusts: The section introduces specific provisions for oral trusts, requiring trustees to submit a written statement to the Assessing Officer to formalize the trust's details.
3. Deemed Compliance for Trusts: Trusts not declared in writing can still be recognized if trustees submit a written statement within the specified timeframe.

Practical Implications:

1. For Non-Residents: Agents managing income for non-residents must comply with tax obligations on behalf of the non-resident.
2. For Guardians and Managers: Guardians of minors or mentally ill individuals, as well as court-appointed managers, are responsible for filing tax returns and paying taxes on the income they manage.
3. For Trustees: Trustees of written and oral trusts must ensure proper documentation and timely submission of details to the Assessing Officer. Oral trusts, in particular, must formalize their status through a written statement.
4. Compliance Burden: Representative assessees must maintain accurate records and ensure timely reporting of income and tax liabilities.

Critical Concepts:

1. Representative Assessee: A person or entity legally responsible for managing income on behalf of another and fulfilling tax obligations.
2. Oral Trust: A trust created verbally (not in writing) that requires formalization through a written statement to the Assessing Officer.
3. Deemed Compliance: Trusts not declared in writing can still be recognized if trustees submit a written statement within the specified timeframe.

Compliance Steps:

1. Identify Representative Assessee Status: Determine if you qualify as a representative assessee under the categories listed in the section.
2. Documentation for Trusts:
   • For written trusts: Ensure the trust deed is properly executed and maintained.
   • For oral trusts: Prepare and submit a written statement to the Assessing Officer within three months of the trust's declaration or by the specified deadline.
3. File Tax Returns: Representative assessees must file tax returns and pay taxes on the income they manage.
4. Maintain Records: Keep detailed records of income, expenses, and compliance documents for audit purposes.

Examples:

1. Non-Resident Agent: A company in India acts as an agent for a non-resident client. The company must report and pay taxes on the income earned by the non-resident in India.
2. Guardian of a Minor: A parent manages rental income from a property owned by their minor child. The parent must file tax returns and pay taxes on the rental income.
3. Oral Trust: A family verbally agrees to create a trust for managing a property. The trustee must submit a written statement to the Assessing Officer within three months to formalize the trust's status.

This section ensures that income managed by third parties is properly reported and taxed, maintaining compliance with the Income Tax Act.