Section 115TC — Case Laws & Commentary

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

Section 115TC — Securitisation trust to be assessee in default

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

Provision: Deems the person responsible for paying the distributed income, and the securitisation trust, to be an ‘assessee in default’ where the section 115TA distribution tax is not paid, and applies the whole of the Act's collection-and-recovery machinery.

Operative window: Inserted by the Finance Act, 2013 (w.e.f. 1 June 2013) as the recovery leg of Chapter XII-EA. Like the charge, it bites only on a section 115TA liability — confined to distributions between 1 June 2013 and 31 May 2016.

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

Reading note: No decision construing section 115TC has been reported. It is read below against its drafting-sibling section 115-Q (deemed default for the dividend-distribution tax) and the established ‘assessee in default’ jurisprudence, including the Supreme Court's bar on double recovery. These cognate authorities are flagged as such.

A. SECTION COMMENTARY

A.1 Function — the recovery switch of the Chapter XII-EA code

Section 115TC is the enforcement provision of the securitisation-trust distribution-tax code. Where the section 115TA tax is not paid, it does two things in one breath: it deems both the “person responsible for making payment” of the distributed income and the securitisation trust — “he or it” — to be an ‘assessee in default’ “in respect of the amount of tax payable”, and it draws in “all the provisions of this Act for the collection and recovery of income-tax.” The deeming is what allows the Department to use the ordinary recovery code (sections 220 to 232, including the section 221 penalty and the section 222 certificate procedure) against a charge that arises outside the regular assessment of total income. It is the exact counterpart of section 115-Q in Chapter XII-D and section 115T in Chapter XII-E.

A.2 Two practical points

First, who is in default: the section fastens default on two persons jointly — the payer of the distributed income and the trust. A defaulter becomes liable not only to recovery but also, under section 221 (drawn in by the deeming), to penalty — though the section 221 proviso spares a defaulter who shows the default was for good and sufficient reasons, so penalty for default is discretionary, not automatic. Second, what is recovered: only “the amount of tax payable” under section 115TA, together with the section 115TB interest that the recovery machinery carries with it; the deeming does not create a fresh charge but switches on the means of collecting the existing one.

A.3 The double-recovery caution and the interpretive backdrop

A latent issue follows from the chapter's exemption architecture. Because the section 115TA charge is the only tax on the income (the trust is exempt under section 10(23DA) and the investor under section 10(35A)), section 115TC default recovery is, in substance, the sole collection point — so the Hindustan Coca-Cola bar on recovering the same tax twice is unlikely to arise in the way it does in the TDS field. But the principle remains the interpretive backdrop: ‘assessee in default’ is a recovery mechanism, not a second charge, and the Department cannot collect more than the single section 115TA tax that the chapter imposes. Like sections 115TA and 115TB, section 115TC operates only on distributions within the 2013–16 window and is, in 2026, a legacy-recovery provision.

B. STATUTORY POSITION (verbatim operative text)

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

115TC. If any person responsible for making payment of the income distributed by the securitisation trust and the securitisation trust does not pay tax, as referred to in sub-section (1) of section 115TA, 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.

C. AUTHORITIES

Candour note: no decision construing section 115TC has been reported. The section is interpreted through (i) the law on its drafting-sibling section 115-Q and the dedicated chapter machinery, and (ii) the Supreme Court ‘assessee in default’ jurisprudence on recovery and the bar against double collection. All entries are cognate and are flagged as such.

Cluster C-1 : Same-chapter machinery — the sibling deemed-default provision (section 115-Q)

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

Principle: Distribution tax (section 115-O) and its interest (section 115-P) arise under a self-contained chapter and do not form part of the section 143(3) assessment; recovery of the unpaid distribution tax proceeds through the dedicated chapter machinery — the deemed-default route of section 115-Q and the general recovery code — and not through revision of the company's assessment.

Application to s.115TC: Section 115TC is the Chapter XII-EA counterpart of section 115-Q, in materially identical terms. The Bijni Dooars analysis confirms that deemed-default recovery for a distribution tax lives in its own chapter's machinery, separate from the regular assessment — the same is true of unpaid section 115TA tax recovered through section 115TC. Cited as the closest analogue, on principle only.

Status: ITAT Kolkata (2023); service citation 2023 TAXSCAN (ITAT) 2620. Tribunal-level decision on the sibling Chapter XII-D machinery (sections 115-O/115-P/115-Q); not a decision on section 115TC.

Cluster C-2 : Cognate ‘assessee in default’ authority (principle only)

Hindustan Coca-Cola Beverages (P) Ltd v. CIT, (2007) 293 ITR 226 (Supreme Court).

Principle: A person treated as an ‘assessee in default’ for failure to deduct/pay tax cannot be made to pay the tax a second time once the tax on the same income has in fact been paid by the person who bore it; the default machinery permits recovery of interest for the period of delay but not double collection of the tax itself.

Application to s.115TC: States the boundary of the ‘assessee in default’ device drawn in by section 115TC: it is a means of collecting the single section 115TA tax, not a licence to collect that tax twice. The principle anchors the reading that section 115TC switches on recovery without creating a fresh or duplicate charge. Cited on principle only.

Status: Supreme Court. Authority on the ‘assessee in default’ concept and the bar on double recovery; not a decision on section 115TC.

CIT v. Eli Lilly & Co. (India) (P) Ltd, (2009) 312 ITR 225 (Supreme Court).

Principle: The ‘assessee in default’ provisions are part of the machinery for collection and recovery; the consequences of default — recovery of the tax, interest for the period of delay, and (subject to good and sufficient reason) penalty — are governed by, and confined to, that machinery. Default does not enlarge the substantive charge.

Application to s.115TC: Confirms that the section 115TC deeming operates within, and is limited by, the Act's collection-and-recovery code — the very code section 115TC expressly draws in. Cited on principle only for the nature and limits of ‘assessee in default’ consequences.

Status: Supreme Court. Authority on the assessee-in-default machinery and its consequences; not a decision on section 115TC.

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

Principle: Liabilities cast in mandatory language under the recovery scheme of the Act operate by force of statute and are not subject to the discretionary indulgence of the assessing authority beyond what the statute and section 119 circulars permit.

Application to s.115TC: Supports the reading that the section 115TC deeming and the recovery consequences it triggers operate automatically once the section 115TA tax is unpaid, subject only to the statutory safeguards (such as the section 221 ‘good and sufficient reason’ proviso). Cited on principle only.

Status: Supreme Court, Constitution Bench. Authority on mandatory statutory liabilities; not a decision on section 115TC.

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.