Section 115QB — Case Laws & Commentary

CHAPTER XII-DA — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME OF DOMESTIC COMPANY FOR BUY-BACK OF SHARES

SECTION 115QB — INTEREST PAYABLE FOR NON-PAYMENT OF BUY-BACK TAX BY COMPANY

Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise

Status: LIVE AS MACHINERY FOR THE BUY-BACK TAX YEARS (UP TO 30 SEPTEMBER 2024). Section 115QB was inserted by the Finance Act, 2013, with effect from 1 June 2013, as the interest-charging machinery attached to section 115QA. It imposes simple interest at one per cent per month (or part of a month) on buy-back tax not paid within the fourteen-day period in section 115QA(3), running from the day after the due date to the date of actual payment. Since the buy-back tax itself ceased for buy-backs taking place on or after 1 October 2024, section 115QB now operates only on defaults relating to buy-back tax for buy-backs up to 30 September 2024 — but it remains fully in force for those years.

Finance Act, 2026 impact: None. The Finance Act, 2026 does not amend section 115QB or Chapter XII-DA.

Candour note on case law: Section 115QB has generated no case law of its own. The interest it imposes is automatic and arithmetical once a buy-back tax default under section 115QA is established, so there is no Supreme Court, High Court or Tribunal decision construing the section itself. In keeping with the discipline of this treatise nothing has been invented. Part C sets out (i) Genpact India, which governs the appeal route through which any 115QB interest dispute must travel because the interest rides on the 115QA determination, and (ii) clearly-labelled cognate authority of the Supreme Court on the mandatory and compensatory nature of statutory interest — the principles a court would apply to section 115QB. Each cognate entry is flagged as principle authority, not as a decision on section 115QB.

A. SECTION COMMENTARY

A.1 Function — compensatory interest welded to section 115QA

Section 115QB is a pure machinery provision. It presupposes a liability to buy-back tax under section 115QA(1) and a failure to pay it, in whole or in part, within the fourteen days allowed by section 115QA(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 buy-back tax, 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 is drafted in terms identical to its Dividend Distribution Tax counterpart, section 115-P, and mirrors the structure of sections 201(1A), 234A–234C and 220(2).

A.2 Three features that decide any question that arises

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), so interest under section 115QB does not depend on any finding of contumacy. Third, it is automatic and self-computing: once the buy-back tax default and its duration are known, the interest follows by arithmetic. These features explain why the section is never litigated on its own merits — a dispute about 115QB interest is always, in truth, a dispute about the underlying 115QA liability.

A.3 The practical point — interest follows the buy-back tax through the appeal route

Because section 115QB interest is consequential on the section 115QA charge, a taxpayer who disputes the buy-back tax disputes the interest with it; and the appellate channel is the one settled by Genpact India — an appeal to the Commissioner (Appeals) under section 246A, not a writ. If the 115QA charge is set aside or reduced in appeal, the 115QB interest falls or abates correspondingly; if the charge is upheld, the interest is recomputed for the actual period of default. There is no independent ground of appeal against the interest as such, except on the arithmetic (the principal amount in default and the number of months), which is rarely in issue.

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 company.

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.

[Inserted by the Finance Act, 2013, w.e.f. 1-6-2013, as part of Chapter XII-DA. Operative on defaults relating to buy-back tax for buy-backs up to 30 September 2024 (the buy-back tax having ceased for buy-backs taking place on or after 1-10-2024 by virtue of the second proviso to section 115QA(1), inserted by the Finance (No. 2) Act, 2024).]

C. AUTHORITIES

There is no decision construing section 115QB itself (see the candour note above). The entries below are (i) the binding decision that governs the appeal route through which a 115QB dispute must travel, and (ii) cognate Supreme Court authority on the nature of statutory interest, expressly flagged as principle authority rather than as a ruling on section 115QB.

Cluster C-1 : The governing appeal route (binding)

Genpact India Private Ltd v. Deputy CIT, (2019) 419 ITR 440 : (2019) 111 taxmann.com 402 (Supreme Court), Civil Appeal No. 8945 of 2019, judgment dated 22 November 2019.

Principle: A determination of liability under Chapter XII-DA (section 115QA, and the interest consequential on it under section 115QB) is a denial of the ‘liability to be assessed under this Act’ within section 246A(1)(a); an appeal lies to the Commissioner (Appeals), and a writ under Article 226 will not be entertained where that efficacious remedy exists.

Application to s.115QB: Fixes the procedure for any interest dispute: because 115QB interest is consequential on the 115QA charge, it travels with that charge through the section 246A appeal route. There is no separate writ remedy against the interest.

Status: Supreme Court (22 November 2019); binding. Directly on section 115QA and, by necessary extension, on the consequential interest under section 115QB.

Cluster C-2 : The nature of statutory interest (cognate principle authority)

CIT v. Anjum M. H. Ghaswala, (2001) 252 ITR 1 (Supreme Court, Constitution Bench).

Principle: Interest charged under the mandatory interest provisions of the Act (there, sections 234A, 234B and 234C) is mandatory in nature; the authority has no power to reduce or waive it except as the statute itself permits. The use of ‘shall’ in a charging-of-interest provision admits of no discretion.

Application to s.115QB: Section 115QB uses the same mandatory ‘shall be liable to pay simple interest’. On the Ghaswala principle the interest is automatic and cannot be waived or reduced by the Assessing Officer; the only questions are the quantum of the default and its duration. Cited on principle; not a decision on section 115QB.

Status: Supreme Court, Constitution Bench. Foundational on the mandatory character of statutory interest. Principle authority.

Bharat Commerce & Industries Ltd v. CIT, (1998) 230 ITR 733 (Supreme Court).

Principle: Interest payable for delay in payment of tax is compensatory — it compensates the revenue for being kept out of money lawfully due — and is not in the nature of a penalty; it is attracted by the fact of delay, independently of any culpability.

Application to s.115QB: Confirms that section 115QB interest is compensatory, not penal: it requires no finding of contumacy and no show-cause as a condition of the charge, and runs automatically for the period of the buy-back tax default. Cited on principle; not a decision on section 115QB.

Status: Supreme Court. Principle authority on the compensatory nature of interest.