My apologies, I wasn't aware of that (without having Clone
modifiers properly applied, there was just box having pivot point offset). Now I see, what you've meant. This behaviour is related to the third Clone
modifier with Y Rotation
Boundary Checking mode is not meant to "slice" the geometry, it's removing elements within one item that are "based out of area used for distribution". So, if there are any "overhanging faces" under one element, (as shown on attached screenshot) these will be fully removed or not, depending if the element is based inside/outside of the distribution area.
It behaves like grass blades in nature - if there is a space enough to growth from, the grass blade vegetate and later could overhang that area. Additionally, this way it doesn't affect overall performance (as massive geometry slicing would require huge additional resources). Hope that clears it up a little bit.
Also, as I can see, there are some black artefacts on your image - to get rid of them, please check the Some key notes about Areas->Boundary Checking->Edge mode
post - in case of very high density, many overlapping items could cause those. As adviced in mentioned post, increasing V-Ray's Max transp. levels
usually fixes it easily.