CHAPTER XII-D — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES
CHAPTER XII-D — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES
SECTION 115-P — INTEREST PAYABLE FOR NON-PAYMENT OF TAX BY DOMESTIC COMPANIES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: LIVE AS MACHINERY FOR THE DDT YEARS. Section 115-P was inserted by the Finance Act, 1997, with effect from 1 June 1997, as the interest-charging machinery attached to section 115-O. It imposes simple interest at one per cent per month (or part of a month) on DDT not paid within the fourteen-day period in section 115-O(3), running from the day after the due date to the date of actual payment. Since DDT itself ceased for dividends declared on or after 1 April 2020, section 115-P now operates only on defaults relating to DDT for periods up to 31 March 2020, but it remains fully in force for those years.
Finance Act, 2026 impact: None. The Finance Act, 2026 does not amend section 115-P or Chapter XII-D.
Candour note on case law: Section 115-P has generated little case law of its own, because the interest it imposes is automatic and arithmetical once a DDT default is established; there is no Supreme Court or High Court decision construing the section itself. Nothing has been invented. Part C sets out the directly relevant Tribunal authority (Bijni Dooars Tea), together with clearly labelled cognate authority on the mandatory and compensatory nature of statutory interest — the principles a tribunal applies to section 115-P.
A. SECTION COMMENTARY
A.1 Function — compensatory interest welded to section 115-O
Section 115-P is a pure machinery provision. It presupposes a liability to DDT under section 115-O(1) and a failure to pay it, in whole or in part, within the fourteen days allowed by section 115-O(3). On such failure the principal officer and the company ‘shall be liable’ to pay simple interest at one per cent for every month or part of a month on the unpaid DDT, for the period running from the day immediately after the last date for payment to the date of actual payment. The interest is the standard time-value compensation the Act exacts for retention of money due to the exchequer; it mirrors the structure of sections 201(1A), 234A-234C and 220(2).
A.2 Three features that decide most questions
First, the levy is mandatory, not discretionary: the word ‘shall’ leaves no room for waiver or reduction by the Assessing Officer, in line with the settled construction of the Act's other interest provisions. Second, it is compensatory, not penal: it compensates the revenue for delayed receipt and carries none of the requirements of a penalty (no mens rea, no show-cause as a condition of charge). Third, it is automatic and self-computing: once the DDT default and its duration are known the interest follows by arithmetic, which is why it is rarely litigated on its merits and why a charge of interest under section 115-P does not, by itself, form part of the assessment of total income.
A.3 The procedural point that has actually been litigated
The one reported controversy is procedural. Because section 115-P (like section 115-O) sits in a self-contained chapter and creates a liability distinct from the assessment of the company's total income, a demand of DDT and section 115-P interest does not ‘arise out of’ the regular assessment order under section 143(3). The Kolkata Tribunal in Bijni Dooars Tea drew the consequence that the Principal Commissioner cannot use the revision power under section 263 — which operates on the assessment order — to direct a levy of section 115-P interest or DDT that was never part of that order. The point matters because it channels DDT/interest recovery into the dedicated machinery of sections 115-O to 115-Q rather than the ordinary assessment-and-revision apparatus.
B. STATUTORY POSITION (verbatim operative text)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended up to the Finance Act, 2025; not amended by the Finance Act, 2026):
Interest payable for non-payment of tax by domestic companies.
115P. Where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed profits referred to in sub-section (1) of section 115-O, 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 115P inserted by the Finance Act, 1997, w.e.f. 1-6-1997.]
C. AUTHORITIES
Cluster C-1 : Direct Tribunal authority on section 115-P
Bijni Dooars Tea Co. Ltd v. Principal CIT, 2023 TAXSCAN (ITAT) 2620 (ITAT Kolkata).
Principle: A demand of DDT under section 115-O and interest under section 115-P does not arise out of, and is not part of, the assessment order under section 143(3); section 115-P falls in a separate chapter and creates a liability distinct from the assessment of total income. The revision power under section 263 — directed at the assessment order — cannot be invoked to direct levy of section 115-P interest or DDT that did not form part of that order. The revision order was quashed.
Application to s.115-P: The leading (and effectively the only) reported decision turning on section 115-P. It establishes the section's procedural autonomy from the regular assessment and confines DDT/interest recovery to the dedicated Chapter XII-D machinery.
Status: ITAT Kolkata (2023); Bench of Rajpal Yadav, Vice-President, and Girish Agrawal, Accountant Member; service citation 2023 TAXSCAN (ITAT) 2620. Directly on section 115-P.
Cluster C-2 : Cognate authority on the nature of statutory interest (principle only)
No higher court has construed section 115-P. The following state the principles a court would apply to it — that statutory interest of this kind is mandatory and compensatory. Neither is a decision on section 115-P.
Principle: Interest under sections 234A, 234B and 234C is mandatory; the deliberate use of ‘shall’ makes the charge compulsory, and the authorities have no discretion to waive or reduce it save under a Board circular under section 119.
Application to s.115-P: Section 115-P also uses ‘shall be liable’. On Ghaswala the interest is mandatory and outside the Assessing Officer's discretion to waive. Principle only.
Status: Supreme Court, Constitution Bench. Authority on the mandatory character of statutory interest; not a decision on s.115-P.
Principle: Interest payable for delay in discharging a tax liability is compensation to the revenue for being kept out of money lawfully due; it is not a deductible business expenditure and is not penal.
Application to s.115-P: Confirms the compensatory (not penal) character of interest under the Act — the footing on which section 115-P interest is charged and on which its non-deductibility (reinforced by section 115-O(5)) rests. Principle only.
Status: Supreme Court. Authority on the compensatory nature/non-deductibility of statutory interest; not a decision on s.115-P.
CHAPTER XII-D — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES
SECTION 115-P — INTEREST PAYABLE FOR NON-PAYMENT OF TAX BY DOMESTIC COMPANIES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: LIVE AS MACHINERY FOR THE DDT YEARS. Section 115-P was inserted by the Finance Act, 1997, with effect from 1 June 1997, as the interest-charging machinery attached to section 115-O. It imposes simple interest at one per cent per month (or part of a month) on DDT not paid within the fourteen-day period in section 115-O(3), running from the day after the due date to the date of actual payment. Since DDT itself ceased for dividends declared on or after 1 April 2020, section 115-P now operates only on defaults relating to DDT for periods up to 31 March 2020, but it remains fully in force for those years.
Finance Act, 2026 impact: None. The Finance Act, 2026 does not amend section 115-P or Chapter XII-D.
Candour note on case law: Section 115-P has generated little case law of its own, because the interest it imposes is automatic and arithmetical once a DDT default is established; there is no Supreme Court or High Court decision construing the section itself. Nothing has been invented. Part C sets out the directly relevant Tribunal authority (Bijni Dooars Tea), together with clearly labelled cognate authority on the mandatory and compensatory nature of statutory interest — the principles a tribunal applies to section 115-P.
A. SECTION COMMENTARY
A.1 Function — compensatory interest welded to section 115-O
Section 115-P is a pure machinery provision. It presupposes a liability to DDT under section 115-O(1) and a failure to pay it, in whole or in part, within the fourteen days allowed by section 115-O(3). On such failure the principal officer and the company ‘shall be liable’ to pay simple interest at one per cent for every month or part of a month on the unpaid DDT, for the period running from the day immediately after the last date for payment to the date of actual payment. The interest is the standard time-value compensation the Act exacts for retention of money due to the exchequer; it mirrors the structure of sections 201(1A), 234A-234C and 220(2).
A.2 Three features that decide most questions
First, the levy is mandatory, not discretionary: the word ‘shall’ leaves no room for waiver or reduction by the Assessing Officer, in line with the settled construction of the Act's other interest provisions. Second, it is compensatory, not penal: it compensates the revenue for delayed receipt and carries none of the requirements of a penalty (no mens rea, no show-cause as a condition of charge). Third, it is automatic and self-computing: once the DDT default and its duration are known the interest follows by arithmetic, which is why it is rarely litigated on its merits and why a charge of interest under section 115-P does not, by itself, form part of the assessment of total income.
A.3 The procedural point that has actually been litigated
The one reported controversy is procedural. Because section 115-P (like section 115-O) sits in a self-contained chapter and creates a liability distinct from the assessment of the company's total income, a demand of DDT and section 115-P interest does not ‘arise out of’ the regular assessment order under section 143(3). The Kolkata Tribunal in Bijni Dooars Tea drew the consequence that the Principal Commissioner cannot use the revision power under section 263 — which operates on the assessment order — to direct a levy of section 115-P interest or DDT that was never part of that order. The point matters because it channels DDT/interest recovery into the dedicated machinery of sections 115-O to 115-Q rather than the ordinary assessment-and-revision apparatus.
B. STATUTORY POSITION (verbatim operative text)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended up to the Finance Act, 2025; not amended by the Finance Act, 2026):
Interest payable for non-payment of tax by domestic companies.
115P. Where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed profits referred to in sub-section (1) of section 115-O, 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 115P inserted by the Finance Act, 1997, w.e.f. 1-6-1997.]
C. AUTHORITIES
Cluster C-1 : Direct Tribunal authority on section 115-P
Bijni Dooars Tea Co. Ltd v. Principal CIT, 2023 TAXSCAN (ITAT) 2620 (ITAT Kolkata).
Principle: A demand of DDT under section 115-O and interest under section 115-P does not arise out of, and is not part of, the assessment order under section 143(3); section 115-P falls in a separate chapter and creates a liability distinct from the assessment of total income. The revision power under section 263 — directed at the assessment order — cannot be invoked to direct levy of section 115-P interest or DDT that did not form part of that order. The revision order was quashed.
Application to s.115-P: The leading (and effectively the only) reported decision turning on section 115-P. It establishes the section's procedural autonomy from the regular assessment and confines DDT/interest recovery to the dedicated Chapter XII-D machinery.
Status: ITAT Kolkata (2023); Bench of Rajpal Yadav, Vice-President, and Girish Agrawal, Accountant Member; service citation 2023 TAXSCAN (ITAT) 2620. Directly on section 115-P.
Cluster C-2 : Cognate authority on the nature of statutory interest (principle only)
No higher court has construed section 115-P. The following state the principles a court would apply to it — that statutory interest of this kind is mandatory and compensatory. Neither is a decision on section 115-P.
CIT v. Anjum M.H. Ghaswala, (2001) 252 ITR 1 (Supreme Court, Constitution Bench).
Principle: Interest under sections 234A, 234B and 234C is mandatory; the deliberate use of ‘shall’ makes the charge compulsory, and the authorities have no discretion to waive or reduce it save under a Board circular under section 119.
Application to s.115-P: Section 115-P also uses ‘shall be liable’. On Ghaswala the interest is mandatory and outside the Assessing Officer's discretion to waive. Principle only.
Status: Supreme Court, Constitution Bench. Authority on the mandatory character of statutory interest; not a decision on s.115-P.
Bharat Commerce & Industries Ltd v. CIT, (1998) 230 ITR 733 (Supreme Court).
Principle: Interest payable for delay in discharging a tax liability is compensation to the revenue for being kept out of money lawfully due; it is not a deductible business expenditure and is not penal.
Application to s.115-P: Confirms the compensatory (not penal) character of interest under the Act — the footing on which section 115-P interest is charged and on which its non-deductibility (reinforced by section 115-O(5)) rests. Principle only.
Status: Supreme Court. Authority on the compensatory nature/non-deductibility of statutory interest; not a decision on s.115-P.