Recovery of tax arrear in respect of non-resident from his assets

Section 422 — RECOVERY OF TAX ARREAR IN RESPECT OF NON-RESIDENT FROM HIS ASSETS

Section 422 of the Income-tax Act, 2025 corresponds to s. 173 of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 422 deals with recovery of tax where the person entitled to income referred to in s. 9(2) is a non-resident. The tax chargeable on that income, whether it is charged in the non-resident's own name or in the name of his agent who is liable as a representative assessee, may be recovered by deduction under Chapter XIX-B, and any arrears of tax may also be recovered from any assets of the non-resident which are, or may at any time come, within India. The section operates irrespective of anything contained in s. 304(1) or (5).

KEY ELEMENTS

• Person: a non-resident who is entitled to income referred to in s. 9(2).
• Income covered: s. 9(2) refers to income accruing or arising, directly or indirectly, through or from any asset or source of income in India, any property in India, any business connection in India, or the transfer of a capital asset situated in India.
• Tax covered: the tax chargeable on that income, whether in the name of the non-resident or of his agent liable as a representative assessee.
• Clause (a): the tax may be recovered by deduction under the provisions of Chapter XIX-B.
• Clause (b): any arrears of tax may also be recovered as per the provisions of the Act from any assets of the non-resident which are, or may at any time come, within India.

CHANGES FROM THE 1961 ACT

The section corresponds to s. 173 of the 1961 Act. Visible differences: the heading now refers to "tax arrear" instead of "tax"; the opening words "Without prejudice to the provisions of sub-section (1) of section 161 or of section 167" become "Irrespective of anything contained in section 304(1) or (5)"; the income is that referred to in s. 9(2) instead of clause (i) of sub-section (1) of s. 9 of the 1961 Act; deduction is under Chapter XIX-B instead of "any of the provisions of Chapter XVII-B"; and the two modes of recovery are set out as clauses (a) and (b). The texts in the pack do not explain the change in the opening words.

PRACTITIONER NOTES

• Recovery is not confined to the representative assessee: arrears may be recovered from the non-resident's own assets in India.
• Assets are not limited to those already in India, since the words cover assets which "may at any time come" within India.
• Section 304(1) makes the representative assessee liable to assessment and recovery as regards the income he represents, and s. 304(5) gives the Assessing Officer remedies against property vested in or under the control of a representative assessee. Section 422 applies irrespective of anything in those provisions.
• The deduction route and the arrears route are cumulative ("may also be recovered").

CROSS-REFERENCES

• s. 9(2) — the income whose tax is covered.
• s. 304(1) and (5) — representative assessee provisions over which the section operates.
• Chapter XIX-B — the deduction route in clause (a).
• s. 173 of the 1961 Act — corresponding provision.