Section 115TB — Case Laws & Commentary

CHAPTER XII-EA — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME BY SECURITISATION TRUSTS

Section 115TB — Interest payable for non-payment of tax

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

Provision: Charges simple interest at one per cent per month (or part) where the securitisation-trust distribution tax under section 115TA is not paid within the fourteen days allowed by section 115TA(2).

Operative window: Inserted by the Finance Act, 2013 (w.e.f. 1 June 2013) as the interest leg of Chapter XII-EA. It attaches only to a section 115TA liability, and is therefore confined, like the charge itself, to distributions made between 1 June 2013 and 31 May 2016.

Present status under FA 2026: Unamended. The Finance Act, 2026 makes no change to section 115TB.

Reading note: There is no reported decision on section 115TB. It is construed below by reference to its identically-drafted siblings (section 115-P for the dividend-distribution tax and section 115S for the income-distribution tax) and to the settled law on the mandatory, compensatory character of statutory interest. These cognate authorities are flagged as such.

A. SECTION COMMENTARY

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

Section 115TB is the interest provision of Chapter XII-EA. It has no independent charge: it operates only where the distribution tax under section 115TA(1) is not paid within the fourteen days allowed by section 115TA(2). The interest compensates the revenue for the period it is kept out of a tax that fell due on distribution. The drafting is a near-exact copy of section 115-P (interest on unpaid dividend-distribution tax) and section 115S (interest on unpaid income-distribution tax) — a deliberate borrowing that allows the case law on those siblings to be read across, on principle, to section 115TB.

A.2 Three features that decide most questions

First, the rate and base: simple interest at one per cent for every month or part of a month on the amount of the unpaid section 115TA tax — a part of a month counts as a whole month. Second, the period: interest runs from the date immediately after the last date on which the tax was payable (i.e., the expiry of the fourteen-day window in section 115TA(2)) and ends on the date the tax is actually paid. Third, the persons liable: “the person responsible for making payment” of the distributed income and the securitisation trust — “he or it” — are both within the charge, mirroring the joint liability set up for the tax itself.

A.3 Mandatory and automatic — the likely contours

The section says the defaulter “shall be liable to pay” interest. On the settled construction of identically-worded interest provisions, that language makes the interest mandatory and automatic — it accrues by operation of law, requires no separate order or finding of fault, and is not within the Assessing Officer's discretion to waive or reduce (save under a section 119 circular). The interest is compensatory, not penal, and is consequently not deductible. Because section 115TB only ever attached to a section 115TA default within the 2013–16 window, its practical relevance in 2026 is confined to legacy recovery and appellate proceedings for that period.

B. STATUTORY POSITION (verbatim operative text)

Section 115TB, Income-tax Act, 1961 (Chapter XII-EA):

115TB. Where the person responsible for making payment of the income distributed by the securitisation trust and the securitisation trust fails to pay the whole or any part of the tax referred to in sub-section (1) of section 115TA, within the time allowed under sub-section (2) of that section, he or it shall be liable to pay simple interest at the rate of one per cent 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.

C. AUTHORITIES

Candour note: no decision construing section 115TB has been reported. The section is interpreted through (i) the only reported authority on its drafting-sibling section 115-P, and (ii) the Supreme Court law on the mandatory and compensatory nature of statutory interest. All entries are cognate and are flagged as such.

Cluster C-1 : Nearest analogue — the sibling distribution-tax interest provision (section 115-P)

Bijni Dooars Tea Co. Ltd v. Principal CIT, 2023 TAXSCAN (ITAT) 2620 (ITAT Kolkata).

Principle: Interest on unpaid distribution tax (there, section 115-P on the dividend-distribution tax under section 115-O) arises under a self-contained chapter and does not form part of the assessment of total income under section 143(3); the liability lives in the dedicated chapter's own machinery and cannot be reached through the section 263 revision of the assessment order.

Application to s.115TB: Section 115TB is the Chapter XII-EA counterpart of section 115-P, drafted in materially identical terms. The Bijni Dooars reasoning — that distribution-tax interest is a chapter-specific, free-standing liability separate from the regular assessment — carries across to section 115TB: a section 115TB interest liability is part of the securitisation-trust distribution-tax code, not of the trust's ordinary assessment. Cited as the closest available analogue, on principle only.

Status: ITAT Kolkata (2023); service citation 2023 TAXSCAN (ITAT) 2620. Tribunal-level decision on section 115-P (the sibling provision); not a decision on section 115TB.

Cluster C-2 : Cognate authority on the nature of statutory interest (principle only)

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

Principle: Statutory interest charged in the language of “shall” (as in sections 234A–234C) is mandatory; the authorities have no discretion to waive or reduce it except as permitted by a Board circular under section 119. The deliberate legislative choice of “shall” makes the charge compulsory and automatic.

Application to s.115TB: Section 115TB likewise provides that the defaulter “shall be liable to pay” interest. On Ghaswala, the interest is mandatory, accrues by operation of law, and is outside the Assessing Officer's discretion to waive or reduce. Cited on principle only.

Status: Supreme Court, Constitution Bench. Authority on the mandatory character of statutory interest; not a decision on section 115TB.

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

Principle: Interest payable for delay in discharging a tax liability under the Act is in the nature of compensation to the revenue for being kept out of money lawfully due; it is not penal in character and is not a deductible business expenditure.

Application to s.115TB: Confirms the compensatory (not penal) character of the interest charged by section 115TB, and its non-deductibility — reinforced by the no-deduction rule in section 115TA(4). The interest runs to compensate the revenue for the delay beyond the fourteen-day window. Cited on principle only.

Status: Supreme Court. Authority on the compensatory nature and non-deductibility of statutory interest; not a decision on section 115TB.

Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the Income-tax Act, 1961. Citations stated as reported; tribunal and stay-stage orders are flagged as such. This material is for professional reference and is not legal advice.