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-Q — WHEN COMPANY IS DEEMED TO BE IN DEFAULT
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: LIVE AS RECOVERY MACHINERY FOR THE DDT YEARS. Section 115-Q was inserted by the Finance Act, 1997, with effect from 1 June 1997, as the recovery machinery of the DDT regime. It deems the principal officer and the domestic company to be an ‘assessee in default’ in respect of unpaid DDT and applies the whole of the Act's collection-and-recovery machinery to that default. Since DDT ceased for dividends declared on or after 1 April 2020, section 115-Q now operates only on DDT defaults relating to periods up to 31 March 2020, but it remains in force for those years. (The Explanation, which formerly defined ‘principal officer’ and ‘tax on distributed profits’, now reads ‘[***]’ — omitted as redundant once those expressions were otherwise defined.)
Finance Act, 2026 impact: None. The Finance Act, 2026 does not amend section 115-Q or Chapter XII-D.
Candour note on case law: There is no reported decision of the Supreme Court, any High Court or the ITAT that directly construes section 115-Q. It is a short deeming-and-recovery machinery provision that operates by drawing in the Act's general recovery code; it has not itself been the subject of interpretive litigation. Nothing has been invented. Part C sets out the directly relevant Tribunal decision from the same chapter (Bijni Dooars Tea) and clearly labelled cognate authority on ‘principal officer’ and ‘assessee in default’.
A. SECTION COMMENTARY
A.1 Function — the recovery switch of the DDT regime
Section 115-Q completes Chapter XII-D. Where the principal officer of a domestic company and the company do not pay DDT in accordance with section 115-O, the section deems both to be an ‘assessee in default’ in respect of the unpaid tax, and switches on ‘all the provisions of this Act for the collection and recovery of income-tax’. It carries no charge and no rate of its own; its single office is to convert a DDT default into a recoverable demand against the company and its principal officer, with the consequences that ordinarily attend an assessee in default — recovery under sections 220 to 232, and the penalty exposure under section 221.
A.2 Two practical points
First, the joint deeming — ‘he or it’ — makes both the principal officer (as defined in section 2(35)) and the company liable, so the revenue may proceed against either; the principal officer's liability is personal in the sense of exposure to the recovery machinery, though the underlying tax is the company's distribution tax. Second, the section operates in tandem with section 115-P: interest under section 115-P runs on the unpaid DDT for the period of default, while section 115-Q makes the same unpaid DDT recoverable as if it were tax due from an assessee in default. The two together — compensatory interest plus the full recovery code — are the enforcement arm of section 115-O.
A.3 The interpretive backdrop
Because section 115-Q borrows the general recovery machinery, the law surrounding ‘assessee in default’ (chiefly under sections 201 and 220-221) and the definition of ‘principal officer’ in section 2(35) supplies its working content. The settled principle that a deemed default does not attract penalty under section 221 where there is ‘good and sufficient reason’ for the non-payment, and the principle that the principal officer must have been put on notice of his status before personal recovery, are the doctrines a tribunal would import when section 115-Q is invoked. These are set out, as cognate principle authority, in Part C.
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):
When company is deemed to be in default.
115Q. If any principal officer of a domestic company and the company does not pay tax on distributed profits in accordance with the provisions of section 115-O, 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.
Explanation.—[***]
[Section 115Q inserted by the Finance Act, 1997, w.e.f. 1-6-1997; the Explanation since omitted.]
C. AUTHORITIES
No decision directly interprets section 115-Q. The decision in Cluster C-1 governs the same chapter and is the closest reported authority on how DDT-related demands are channelled; Cluster C-2 sets out cognate principle authority on the concepts the section borrows. Each cognate entry is flagged as principle authority, not a decision on section 115-Q.
Bijni Dooars Tea Co. Ltd v. Principal CIT, 2023 TAXSCAN (ITAT) 2620 (ITAT Kolkata).
Principle: DDT under section 115-O and interest under section 115-P arise under a self-contained chapter and do not form part of the section 143(3) assessment order; the section 263 revision power, directed at the assessment order, cannot reach them.
Application to s.115-Q: Reinforces that DDT liability — and therefore the deemed-default recovery under section 115-Q — lives in the dedicated Chapter XII-D machinery rather than in the ordinary assessment. Recovery of unpaid DDT proceeds through the section 115-Q deeming and the general recovery code, not through revision of the company's assessment.
Status: ITAT Kolkata (2023); service citation 2023 TAXSCAN (ITAT) 2620. Tribunal-level; closest reported authority on the chapter's machinery, not a decision on section 115-Q itself.
Cluster C-2 : Cognate authority on ‘assessee in default’ and ‘principal officer’ (principle only)
Principle: ‘Principal officer’ means the secretary, treasurer, manager or agent of the company, or any person connected with the management or administration on whom the Assessing Officer has served notice of intention to treat him as the principal officer. A person is not the principal officer for recovery purposes unless he falls in the named class or has been served with the requisite notice.
Application to s.115-Q: Section 115-Q deems ‘any principal officer’ to be an assessee in default; section 2(35) supplies who that is and the notice precondition for treating a connected person as such. Cited as the governing statutory definition.
Status: Statutory definition; the operative content of the term used in section 115-Q.
Principle on section 221 penalty — ‘good and sufficient reason’ (recovery code drawn in by section 115-Q).
Principle: An assessee in default is liable to penalty under section 221, but the proviso bars penalty where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons; penalty for default is discretionary and not automatic, and recovery is governed by sections 220-232.
Application to s.115-Q: Because section 115-Q applies ‘all the provisions of this Act for the collection and recovery of income-tax’, the section 221 proviso and the recovery code in sections 220-232 govern a DDT default — a company/principal officer deemed in default can resist penalty on good and sufficient cause. Cited on principle as part of the recovery code the section incorporates.
CHAPTER XII-D — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES
SECTION 115-Q — WHEN COMPANY IS DEEMED TO BE IN DEFAULT
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: LIVE AS RECOVERY MACHINERY FOR THE DDT YEARS. Section 115-Q was inserted by the Finance Act, 1997, with effect from 1 June 1997, as the recovery machinery of the DDT regime. It deems the principal officer and the domestic company to be an ‘assessee in default’ in respect of unpaid DDT and applies the whole of the Act's collection-and-recovery machinery to that default. Since DDT ceased for dividends declared on or after 1 April 2020, section 115-Q now operates only on DDT defaults relating to periods up to 31 March 2020, but it remains in force for those years. (The Explanation, which formerly defined ‘principal officer’ and ‘tax on distributed profits’, now reads ‘[***]’ — omitted as redundant once those expressions were otherwise defined.)
Finance Act, 2026 impact: None. The Finance Act, 2026 does not amend section 115-Q or Chapter XII-D.
Candour note on case law: There is no reported decision of the Supreme Court, any High Court or the ITAT that directly construes section 115-Q. It is a short deeming-and-recovery machinery provision that operates by drawing in the Act's general recovery code; it has not itself been the subject of interpretive litigation. Nothing has been invented. Part C sets out the directly relevant Tribunal decision from the same chapter (Bijni Dooars Tea) and clearly labelled cognate authority on ‘principal officer’ and ‘assessee in default’.
A. SECTION COMMENTARY
A.1 Function — the recovery switch of the DDT regime
Section 115-Q completes Chapter XII-D. Where the principal officer of a domestic company and the company do not pay DDT in accordance with section 115-O, the section deems both to be an ‘assessee in default’ in respect of the unpaid tax, and switches on ‘all the provisions of this Act for the collection and recovery of income-tax’. It carries no charge and no rate of its own; its single office is to convert a DDT default into a recoverable demand against the company and its principal officer, with the consequences that ordinarily attend an assessee in default — recovery under sections 220 to 232, and the penalty exposure under section 221.
A.2 Two practical points
First, the joint deeming — ‘he or it’ — makes both the principal officer (as defined in section 2(35)) and the company liable, so the revenue may proceed against either; the principal officer's liability is personal in the sense of exposure to the recovery machinery, though the underlying tax is the company's distribution tax. Second, the section operates in tandem with section 115-P: interest under section 115-P runs on the unpaid DDT for the period of default, while section 115-Q makes the same unpaid DDT recoverable as if it were tax due from an assessee in default. The two together — compensatory interest plus the full recovery code — are the enforcement arm of section 115-O.
A.3 The interpretive backdrop
Because section 115-Q borrows the general recovery machinery, the law surrounding ‘assessee in default’ (chiefly under sections 201 and 220-221) and the definition of ‘principal officer’ in section 2(35) supplies its working content. The settled principle that a deemed default does not attract penalty under section 221 where there is ‘good and sufficient reason’ for the non-payment, and the principle that the principal officer must have been put on notice of his status before personal recovery, are the doctrines a tribunal would import when section 115-Q is invoked. These are set out, as cognate principle authority, in Part C.
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):
When company is deemed to be in default.
115Q. If any principal officer of a domestic company and the company does not pay tax on distributed profits in accordance with the provisions of section 115-O, 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.
Explanation.—[***]
[Section 115Q inserted by the Finance Act, 1997, w.e.f. 1-6-1997; the Explanation since omitted.]
C. AUTHORITIES
No decision directly interprets section 115-Q. The decision in Cluster C-1 governs the same chapter and is the closest reported authority on how DDT-related demands are channelled; Cluster C-2 sets out cognate principle authority on the concepts the section borrows. Each cognate entry is flagged as principle authority, not a decision on section 115-Q.
Cluster C-1 : Closest reported Tribunal authority (same-chapter machinery)
Bijni Dooars Tea Co. Ltd v. Principal CIT, 2023 TAXSCAN (ITAT) 2620 (ITAT Kolkata).
Principle: DDT under section 115-O and interest under section 115-P arise under a self-contained chapter and do not form part of the section 143(3) assessment order; the section 263 revision power, directed at the assessment order, cannot reach them.
Application to s.115-Q: Reinforces that DDT liability — and therefore the deemed-default recovery under section 115-Q — lives in the dedicated Chapter XII-D machinery rather than in the ordinary assessment. Recovery of unpaid DDT proceeds through the section 115-Q deeming and the general recovery code, not through revision of the company's assessment.
Status: ITAT Kolkata (2023); service citation 2023 TAXSCAN (ITAT) 2620. Tribunal-level; closest reported authority on the chapter's machinery, not a decision on section 115-Q itself.
Cluster C-2 : Cognate authority on ‘assessee in default’ and ‘principal officer’ (principle only)
Section 2(35), Income-tax Act, 1961 — definition of ‘principal officer’ (statutory).
Principle: ‘Principal officer’ means the secretary, treasurer, manager or agent of the company, or any person connected with the management or administration on whom the Assessing Officer has served notice of intention to treat him as the principal officer. A person is not the principal officer for recovery purposes unless he falls in the named class or has been served with the requisite notice.
Application to s.115-Q: Section 115-Q deems ‘any principal officer’ to be an assessee in default; section 2(35) supplies who that is and the notice precondition for treating a connected person as such. Cited as the governing statutory definition.
Status: Statutory definition; the operative content of the term used in section 115-Q.
Principle on section 221 penalty — ‘good and sufficient reason’ (recovery code drawn in by section 115-Q).
Principle: An assessee in default is liable to penalty under section 221, but the proviso bars penalty where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons; penalty for default is discretionary and not automatic, and recovery is governed by sections 220-232.
Application to s.115-Q: Because section 115-Q applies ‘all the provisions of this Act for the collection and recovery of income-tax’, the section 221 proviso and the recovery code in sections 220-232 govern a DDT default — a company/principal officer deemed in default can resist penalty on good and sufficient cause. Cited on principle as part of the recovery code the section incorporates.
Status: Statutory principle (sections 220-221) imported by section 115-Q; stated on principle, not a decision on section 115-Q.