Section 115QC

Section 115QC — the law in short

What the courts have decided on section 115QC, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Genpact India Pvt Ltd v DCIT Supreme CourtHelps departmentValidity unconfirmed
  The Assessing Officer has fastened buy-back tax under s.115QA on my company. Do I have a right of appeal, or must I go to the High Court by writ?
  You have a right of appeal. The Supreme Court held that a determination of liability under s.115QA is covered by the words 'an order against the assessee, where the assessee denies his liability to be assessed under this Act' in s.246(1)(a) and s.246A(1)(a), so an appeal lies; and because that remedy exists, the High Court was right to refuse a writ petition.
• Bhikhalal Prahladrai Agarwal (HUF) v ACIT (ITAT Rajkot) — a shareholder's s.10(34A) buy-back exemption cannot be withdrawn because the Assessing Officer thinks the company underpaid s.115QA tax, and "distributed income" is measured from the ISSUE price including premium, not the shareholder's cost ITATHelps taxpayer
  My client claimed the buy-back proceeds as exempt under section 10(34A). The Assessing Officer says the company paid too little buy-back tax, so he has denied the exemption and assessed the whole gain under section 46A. Can he do that?
  No — on a buy-back before 1 October 2024, which is the regime this order is about, the ITAT Rajkot held that neither s.115QA nor s.10(34A) empowers the Assessing Officer to withdraw the shareholder's exemption on the ground that the company paid too little, and that the remedy for short payment lies against the company and its principal officer under s.115QC. The Tribunal also held that the officer had used the wrong base: "distributed income" under the Explanation to s.115QA(1) read with Rule 40BB is the buy-back consideration less the amount the COMPANY received on issue of the shares, including premium — here Rs.26 less Rs.25 — and not the buy-back price less the tendering shareholder's cost of Rs.2. The addition of Rs.46,46,469 was deleted.
• Statutory position — s.10(34A): the shareholder's exemption for buy-back proceeds, what it covered from AY 2014-15, why it stopped mattering for buy-backs on or after 1 October 2024, and the one thing it does not do CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  For a buy-back completed before 1 October 2024 my client claimed the whole receipt as exempt under section 10(34A). The officer says the company got its section 115QA computation wrong, so the exemption goes. Is that right — and does the exemption still exist for a buy-back done now?
  Section 10(34A) is a provision about buy-backs BEFORE 1 October 2024: it exempts in the shareholder's hands "any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA", and because the second proviso to s.115QA(1) switches that section off for any buy-back taking place on or after 1 October 2024, a buy-back from that date is no longer one "referred to in section 115QA" and the exemption has nothing to attach to — the proceeds are instead a deemed dividend under s.2(22)(f). The clause was inserted by the Finance Act, 2013 with effect from 1 April 2014, that is from AY 2014-15, and as originally enacted it was confined to buy-back of shares "(not being listed on a recognised stock exchange)"; the words of limitation had gone by the time the Tribunal reproduced the clause in 2024 and 2025, matching the parallel deletion of the same words from s.115QA with retrospective effect from 5 July 2019.
• Statutory position — s.115QA: the twenty per cent buy-back tax on the COMPANY, the 5 July 2019 extension to listed shares, and the second proviso that switches the section off for buy-backs on or after 1 October 2024 CBDT Circulars & InstructionsCuts both ways
  The department has raised a demand on my client company under section 115QA on a buy-back. Which buy-backs does the section actually reach, at what rate, on what figure, and is it still alive?
  Section 115QA charges the COMPANY, not the shareholder, and it governs buy-backs from 1 June 2013 up to and including 30 September 2024 only: the second proviso to sub-section (1), inserted by Act No. 15 of 2024 with effect from 1 October 2024, provides that the sub-section "shall not apply in respect of any buy-back of shares, that takes place on or after the 1st day of October, 2024". Within that window a domestic company is liable, in addition to the income-tax on its total income, to additional income-tax at twenty per cent on the "distributed income" — defined by the Explanation as the consideration paid on the buy-back reduced by the amount received by the company for issue of those shares, determined in the manner prescribed (Rule 40BB). Two dates cut across the window: until 5 July 2019 the section applied only to shares not listed on a recognised stock exchange, and the first proviso preserves that exclusion for a listed buy-back whose public announcement was made on or before 5 July 2019.
• Statutory position — s.115QA(3), s.115QB and s.115QC: the fourteen-day payment window on buy-back tax, one per cent a month interest, and the principal officer who becomes an assessee in default CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  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".

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.