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Case law › Circulars › 2014 › Circular 6/2014, dated 11-2-2014
CBDT circular 11 February 2014

Circular 6/2014, dated 11-2-2014

Government of India

What this is

Circular 6/2014, dated 11-2-2014 was issued by the Central Board of Direct Taxes on 11 February 2014. Its subject is Government of India.

What it does

Confines the additional income-tax under section 115R to income actually distributed. Some field authorities were treating a mutual fund or specified company as liable under section 115R(2) not only on income distributed by way of dividend but also on payments made on redemption or repurchase of units and on the allotment of bonus units. The Board holds that what section 115R(2) charges is the dividend paid to unit holders, that redemption or repurchase of units is not income distributed to the unit holder and so falls outside the sub-section, and that bonus units at the time of issue are likewise not subjected to the additional income-tax. It notes that the income so distributed is exempt in the unit holder's hands under section 10(35).

Why it was issued

It had been reported to the Board that some field authorities were taking the wider view of section 115R(2), and the matter was examined by reference to the scheme of Chapter XII-E, which deals with tax on distributed income.

Who it reaches

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.
Under the 1961 ActNow
s.1Lno counterpart recorded
s.10s.11, s.19
s.115Rno counterpart recorded

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Circular No. 6 PA
North Bloch New
dated the 11tn of February, 2

Sfbiect: -
upder section

Clarificalion regarding scope of additional income-tax on distributed
115R of the Income-tax Act -regarding.

Secticln 115R of the Income-tax Act, 196L ['Act') provides for levy of additional income-tax
tecl income to unit holders (hereinafter referred to as'additional income-tax').

It h;rs been reportEd that some field authorities are taking a view that mutual funds/speci
nies are required [o pay additional income tax under sub-section (2) to section 115R of
not only on income distributed by way of dividend but also on payments made at the ti
n/repurchase of units as well as at the time of allotment of bonus units to ex

The nnatter has bee!'r examined by the Board. Section 1L5R is placed under Chapter XII-E of
which is titled as "SPECIFIC PR)VIil)NS RELATING T0 TAX ON DISTRIBUTED INCOME'

ribes special proviqions for taxing'distributed income', which is not taxed under any
ions of the Act.

Sub-section (2) of section 115R of the Act provides that any amount of income distribu
(i) a specified compafry, or (ii) a mutual fund to its unit holders shall be chargeable to tax
h entitiies shall be lidble to pay additional income tax on such distributed income at the
ibedl therein. The income so distributed by such entities is the dividend paid to the
and is liable to tqx under this section. However, redemption of units or repurchase of u
uld not attract levy of tax under sub-section (2) to section 115R of the Act as such income is
the nature of income 'ldistributed" to the unit holders and hence lies outside the purview of
on.

Further, the incqme so distributed by the mutual fund or specified company in the
e recipiernt unit holder is specifically exempt from tax under section 10(35) of the Act. Prov
of
ng
it
its
ot
is
of
to

Sinailarly, bonus gnits at the time of issue would not be subjected to additional income
adflitional units by way of bonus units would not be subjected to levy of additional income
under that s;ection.

This may be brought to the notice of all concerned.

Hindi version to follow.

(Rohit
Deputy Secretary to the Government of
(F.No. 22s / r82 /2013-ITA.I

1. Chairman and all Members of CBDT
2. Director General of Income Tax (Systems) witl request for uploading on official website
3. AllChief-Commissioners/Directors-Generaloflncome-tax
4. All Officers and Technical Sections ofCBDT
5. Director of Income tax (lnv.)/lT & Audit/Vigilance/lnv./RSP&PR/Recovery
6. Director of lncome tax (0&MS), New Delhi
7 . ITCC Division of CBDT (3 copies)
8. NIC, M/o-Finance for uploading on Departments website
9. Database Cell for uploading on IRS 0fficers website
10. Guard File

(Rohit
8.
9.

cofv to:

Deputy Secretary to the Government of

What to watch

Where you meet it

In a demand on a mutual fund under section 115R treating redemption payments or bonus unit allotments as distributed income.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

← Circular 5/2014, dated 11-2-2014  ·  Circular 4/2014, dated 10-2-2014 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.