The company paid its buy-back consideration months ago and has only now been told it owes tax under section 115QA. How long did it have, what interest runs, and who can the department recover from?
This machinery bites only on buy-backs that s.115QA governs, which means buy-backs before 1 October 2024; for a buy-back on or after that date there is no company-level charge to collect, because the second proviso to s.115QA(1) disapplies the section. Within that window, s.115QA(3) requires the principal officer of the domestic company AND the company to pay the tax to the credit of the Central Government "within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares". Section 115QB imposes simple interest at one per cent for every month or part of a month on unpaid tax, running from the day immediately after the last date on which the tax was payable to the date it is actually paid. Section 115QC then provides that where the principal officer and the company do not pay, "he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply".
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2013-06-01, reported as Section 115QB of the Income-tax Act, 1961 transcribed from incometaxindia.gov.in/w/section-115qb (heading "Interest payable for non-payment of tax by company", Year: 2013); s.115QA(3) transcribed from incometaxindia.gov.in/w/section-115qa-12 (Year: 2025) and /w/section-115qa (Year: 2013); s.115QA(4), (5) and s.115QC reproduced verbatim by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39; s.115QB also read in identical words on incometaxindia.gov.in/w/section-115qb-1 (Year: 2014) and /w/section-115qb-3 (Year: 2016); s.115QC read on incometaxindia.gov.in/w/section-115qc-2 (heading "When company is deemed to be assessee in default", Year: 2015). It bears on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 of the Income Tax Act 1961, in Demand, Recovery & Stay, How Tax Law Is Read and Capital Gains matters.
Three consequences follow that are easy to miss. First, the clock is short and it does not run from the year end or from the assessment — it runs from the date of payment of the consideration to the shareholder, so a company that pays out in instalments has a separate fourteen-day window on each payment. Second, s.115QB's interest is not the s.220(2) interest; it is a standalone charge at one per cent per month or part thereof from the day after the due date, and it runs whether or not any demand has been raised. Third, the exposure is personal. Section 115QC makes the principal officer, as well as the company, a deemed assessee in default for the tax payable "by him or it", and applies the whole recovery apparatus of the Act. That is the department's route where a buy-back tax has not been paid — and it is precisely why an Assessing Officer cannot instead recover the shortfall by taxing the shareholder. The ITAT Rajkot made that point in terms on 21 August 2025: where the company underpays, "recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and there is "no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A)". Finally, read the finality provisions alongside: s.115QA(4) makes the tax the final payment on that income with no further credit to the company or any other person, and s.115QA(5) denies any deduction under any other provision of the Act to the company or the shareholder in respect of that income or the tax on it — so the interest and the tax are pure cost.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 115QA(3), transcribed from the departmental pages stamped Year 2013 and Year 2025 in identical words, reads: "The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1)." Section 115QB, transcribed from the departmental page stamped Year 2013, reads: "115QB. Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid." Section 115QC, as reproduced verbatim by the ITAT Rajkot on 21 August 2025, reads: "If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply." Sub-sections (4) and (5) of s.115QA, from the same sources, make the tax the final payment of tax on that income with no further credit to the company or any other person, and deny any deduction under any other provision of the Act to the company or a shareholder in respect of that income or the tax on it.
Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
Not a judgment; no judicial reasoning is stated for these provisions. On their function the ITAT Rajkot held on 21 August 2025 that if a company did not pay the proper tax on a buy-back under s.115QA, "in such case, recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and that "In the absence of actual tax payment or short/improper tax payment, the recovery has to be made from the company and there is no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A) of the Act."
Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.
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Handle my notice → Ask a CA on WhatsAppThis machinery bites only on buy-backs that s.115QA governs, which means buy-backs before 1 October 2024; for a buy-back on or after that date there is no company-level charge to collect, because the second proviso to s.115QA(1) disapplies the section. Within that window, s.115QA(3) requires the principal officer of the domestic company AND the company to pay the tax to the credit of the Central Government "within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares". Section 115QB imposes simple interest at one per cent for every month or part of a month on unpaid tax, running from the day immediately after the last date on which the tax was payable to the date it is actually paid. Section 115QC then provides that where the principal officer and the company do not pay, "he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply". This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 of the Income Tax Act 1961. It is reported as Section 115QB of the Income-tax Act, 1961 transcribed from incometaxindia.gov.in/w/section-115qb (heading "Interest payable for non-payment of tax by company", Year: 2013); s.115QA(3) transcribed from incometaxindia.gov.in/w/section-115qa-12 (Year: 2025) and /w/section-115qa (Year: 2013); s.115QA(4), (5) and s.115QC reproduced verbatim by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39; s.115QB also read in identical words on incometaxindia.gov.in/w/section-115qb-1 (Year: 2014) and /w/section-115qb-3 (Year: 2016); s.115QC read on incometaxindia.gov.in/w/section-115qc-2 (heading "When company is deemed to be assessee in default", Year: 2015). Three consequences follow that are easy to miss. First, the clock is short and it does not run from the year end or from the assessment — it runs from the date of payment of the consideration to the shareholder, so a company that pays out in instalments has a separate fourteen-day window on each payment. Second, s.115QB's interest is not the s.220(2) interest; it is a standalone charge at one per cent per month or part thereof from the day after the due date, and it runs whether or not any demand has been raised. Third, the exposure is personal. Section 115QC makes the principal officer, as well as the company, a deemed assessee in default for the tax payable "by him or it", and applies the whole recovery apparatus of the Act. That is the department's route where a buy-back tax has not been paid — and it is precisely why an Assessing Officer cannot instead recover the shortfall by taxing the shareholder. The ITAT Rajkot made that point in terms on 21 August 2025: where the company underpays, "recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and there is "no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A)". Finally, read the finality provisions alongside: s.115QA(4) makes the tax the final payment on that income with no further credit to the company or any other person, and s.115QA(5) denies any deduction under any other provision of the Act to the company or the shareholder in respect of that income or the tax on it — so the interest and the tax are pure cost. If it applies to you, the first step is this: Map every payment of buy-back consideration to its own fourteen-day due date, and compute s.115QB interest from the day after each of them at one per cent per month or part of a month.
Section 115QA(3), transcribed from the departmental pages stamped Year 2013 and Year 2025 in identical words, reads: "The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1)." Section 115QB, transcribed from the departmental page stamped Year 2013, reads: "115QB. Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid." Section 115QC, as reproduced verbatim by the ITAT Rajkot on 21 August 2025, reads: "If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply." Sub-sections (4) and (5) of s.115QA, from the same sources, make the tax the final payment of tax on that income with no further credit to the company or any other person, and deny any deduction under any other provision of the Act to the company or a shareholder in respect of that income or the tax on it. The matter was decided on 2013-06-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
Not a judgment; no judicial reasoning is stated for these provisions. On their function the ITAT Rajkot held on 21 August 2025 that if a company did not pay the proper tax on a buy-back under s.115QA, "in such case, recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and that "In the absence of actual tax payment or short/improper tax payment, the recovery has to be made from the company and there is no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A) of the Act." In the words reproduced by the source cited on this page: "Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid."
It was decided by the CBDT Circulars & Instructions on 2013-06-01 and is reported as Section 115QB of the Income-tax Act, 1961 transcribed from incometaxindia.gov.in/w/section-115qb (heading "Interest payable for non-payment of tax by company", Year: 2013); s.115QA(3) transcribed from incometaxindia.gov.in/w/section-115qa-12 (Year: 2025) and /w/section-115qa (Year: 2013); s.115QA(4), (5) and s.115QC reproduced verbatim by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39; s.115QB also read in identical words on incometaxindia.gov.in/w/section-115qb-1 (Year: 2014) and /w/section-115qb-3 (Year: 2016); s.115QC read on incometaxindia.gov.in/w/section-115qc-2 (heading "When company is deemed to be assessee in default", Year: 2015). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them. It arises in Demand, Recovery & Stay, How Tax Law Is Read and Capital Gains matters, on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Pay the principal tax before arguing about quantum. The interest is a monthly charge that continues to run and is not compounded on a demand, so delay is expensive regardless of the merits. If the demand names the principal officer, check whether he is a principal officer within the meaning of the Act for the relevant period; s.115QC attaches the default to "the principal officer of a domestic company and the company", and identity is a live issue where officers have changed. Where the department is instead proposing to tax the shareholder because the company underpaid, take the point that s.115QC is the prescribed recovery route and that the shareholder's exemption is not a recovery mechanism. Do not budget for a credit or a deduction. Sub-sections (4) and (5) of s.115QA shut out both, for the company and for the shareholder. For a buy-back on or after 1 October 2024, check that no s.115QA machinery is being applied at all — the charge moved to the shareholder under s.2(22)(f) and this Chapter has no work to do.
Validity check could not be completed. Validity check could only be partly completed on s.115QB. Three departmental pages stamped Year 2013, Year 2014 and Year 2016 print it in identical words and none carries an amendment footnote; no page later than Year 2016 was located on that slug, so a later amendment cannot be positively excluded. Section 115QA(3) is corroborated on departmental pages stamped Year 2013 and Year 2025 in identical words, and s.115QC on the departmental page stamped Year 2015 as well as on a Tribunal order of 21 August 2025 that reproduces it. The Chapter continues to govern buy-backs that took place between 1 June 2013 and 30 September 2024, and demands, interest and recovery for that period remain live notwithstanding the prospective switch-off of s.115QA. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
`decided_on` is 1 June 2013, the commencement of the whole Chapter, taken from the footnote on the departmental page stamped Year 2013: "Chapter XII-DA, consisting of sections 115QA to 115QC, inserted by the Finance Act, 2013, w.e.f. 1-6-2013." It is not the vintage of any page. Section 115QB was read on three year-stamped departmental pages — /w/section-115qb (Year: 2013), /w/section-115qb-1 (Year: 2014) and /w/section-115qb-3 (Year: 2016) — which print it in identical words, simple interest at one per cent for every month or part thereof; none of the three carries an amendment footnote, and no page later than Year 2016 was located on that slug, so a later amendment cannot be positively excluded. Section 115QC was read on /w/section-115qc-2 (Income-tax Act, 1961, heading "When company is deemed to be assessee in default", Year: 2015), which prints it in the same words as the ITAT Rajkot's verbatim reproduction in an order dated 21 August 2025 — a document post-dating any amendment that could have been made. Sub-sections (3), (4) and (5) of s.115QA come from the departmental pages stamped Year 2013 and Year 2025 and from the same Tribunal order, which agree. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
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