Section 115QC — Case Laws & Commentary

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

SECTION 115QC — WHEN COMPANY IS DEEMED TO BE ASSESSEE IN DEFAULT (BUY-BACK TAX)

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 115QC was inserted by the Finance Act, 2013, with effect from 1 June 2013, as the recovery-machinery provision that completes Chapter XII-DA. Where the principal officer and the company fail to pay buy-back tax in accordance with section 115QA, the section deems them to be an assessee in default in respect of that tax, so that all the provisions of the Act for the collection and recovery of income-tax apply. Since the buy-back tax ceased for buy-backs taking place on or after 1 October 2024, section 115QC now operates only on defaults relating to 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 115QC or Chapter XII-DA.

Candour note on case law: Section 115QC has generated no case law of its own. The provision is a deeming-and-recovery clause whose operation is mechanical: on default, the company and principal officer step into the shoes of an assessee in default and the general recovery code (sections 220 to 232, and the Second Schedule) applies. There is no Supreme Court, High Court or Tribunal decision construing the section itself, and nothing has been invented. Part C sets out (i) Genpact India, which determines the forum for contesting a Chapter XII-DA liability before the deeming bites, and (ii) clearly-labelled cognate authority on the ‘principal officer’ and on the consequences of being deemed an assessee in default — the principles a court would apply to section 115QC. Each cognate entry is flagged as principle authority, not as a decision on section 115QC.

A. SECTION COMMENTARY

A.1 Function — the recovery gateway of the buy-back tax

Section 115QC is the third and final machinery section of Chapter XII-DA. Its office is narrow but important: it converts a defaulting company and its principal officer into ‘an assessee in default’ for the unpaid buy-back tax, thereby switching on the whole collection-and-recovery code of the Act. Without such a deeming the buy-back tax — a self-contained liability that is not part of the assessment of total income — would have no recovery mechanism; section 115QC supplies it by assimilating the default to an ordinary tax default. The phrase ‘all the provisions of this Act for the collection and recovery of income-tax shall apply’ pulls in section 220 (when tax is payable and the consequences of default), section 221 (penalty for default), sections 222–225 (Tax Recovery Officer and the Second Schedule), and the related machinery.

A.2 Who is fixed with default — the company and the principal officer

The deeming reaches both ‘the principal officer of the domestic company and the company’. ‘Principal officer’ takes its meaning from section 2(35) — the secretary, treasurer, manager or agent of the company, or any person connected with the management or administration upon whom the Assessing Officer has served notice of intention to treat him as principal officer. The joint liability mirrors section 115QA(3) (which fixes both with the obligation to pay) and section 115-Q in the DDT chapter. The practical effect is that recovery may be pursued against the company and, in the circumstances the recovery code allows, against the officer fixed with the default.

A.3 The point at which the section bites — and the prior right of appeal

Section 115QC operates only on a failure to pay buy-back tax ‘in accordance with the provisions of section 115QA’. Before that stage, the company’s remedy against the underlying charge is the statutory appeal settled by Genpact India: an appeal to the Commissioner (Appeals) under section 246A. A company that disputes the buy-back tax should pursue that appeal (and seek stay of recovery) rather than wait for the deeming to operate; once the section 115QC default is established and unstayed, the recovery machinery follows. The section does not create a fresh liability — it characterises an existing unpaid liability for the purpose of recovery.

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 assessee in default.

115QC. If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, 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.

[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 115QC itself (see the candour note above). The entries below are (i) the binding decision that fixes the forum for contesting a Chapter XII-DA liability before the deeming operates, and (ii) cognate authority on the ‘principal officer’ and the deemed-default consequence, expressly flagged as principle authority rather than as a ruling on section 115QC.

Cluster C-1 : Contesting the liability before the deeming bites (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: An appeal lies under section 246A against a determination of liability under section 115QA, the denial of liability to buy-back tax being a denial of the ‘liability to be assessed under this Act’; a writ under Article 226 will not be entertained where that efficacious appellate remedy exists.

Application to s.115QC: Defines the company’s real remedy. The way to resist recovery under section 115QC is to contest the underlying section 115QA charge in appeal under section 246A (and seek stay), not to await the deeming and challenge recovery by writ. Section 115QC presupposes an established, unpaid 115QA liability.

Status: Supreme Court (22 November 2019); binding. Directly on the Chapter XII-DA appeal route.

Cluster C-2 : ‘Principal officer’ and the deemed-default consequence (cognate principle authority)

Section 2(35) of the Income-tax Act, 1961 — definition of ‘principal officer’ (statutory; applied on its terms).

Principle: ‘Principal officer’ means the secretary, treasurer, manager or agent of the company, or any person connected with the management or administration of the company upon whom the Assessing Officer has served a notice of his intention of treating him as the principal officer. A person is not fixed as principal officer for the purpose of a deemed default unless he falls within the definition (and, in the residuary limb, unless the requisite notice has been served).

Application to s.115QC: Section 115QC fastens the deemed default on ‘the principal officer… and the company’. The reach of the section against an individual officer is therefore controlled by section 2(35): the Revenue must establish that the person is a principal officer within the definition before treating him as an assessee in default. Cited on principle.

Status: Statutory definition; applied on its plain terms. Principle authority.

Cognate authority on the recovery consequence — sections 220–222 read with the deemed-default clauses (e.g. section 201(1) for TDS defaults; section 115-Q in the DDT chapter).

Principle: A statutory deeming that a person ‘shall be deemed to be an assessee in default’ does not itself quantify a fresh charge; it attracts the general collection-and-recovery code — section 220 (tax payable and default), section 221 (penalty), and sections 222 to 225 with the Second Schedule (recovery by the Tax Recovery Officer). The deeming is confined to the purpose for which it is created — recovery of the unpaid tax — and is not to be extended beyond that purpose.

Application to s.115QC: Section 115QC is the buy-back analogue of section 115-Q (DDT) and operates the same way: it switches on the recovery code in respect of the unpaid buy-back tax and no more. The quantum and validity of the underlying liability are determined under section 115QA (and contested under section 246A); section 115QC governs only its recovery. Cited on principle; there is no direct decision on section 115QC.

Status: Cognate / principle authority. There is no reported decision construing section 115QC itself.