Tata Steel has received an order from the Income Tax Department to reassess its taxable income for the financial year 2018-19, which has increased its taxable amount by over ₹25,000 crore. The company has moved the Bombay High Court to challenge the reassessment, citing technical infirmities in the order.
The issue revolves around the acquisition of erstwhile Bhushan Steel Limited (now renamed as Tata Steel BSL Limited) by Tata Steel in May 2018 through insolvency proceedings. As a result, a debt of ₹25,185.51 crore was waived off in favour of Tata Steel BSL Limited. The company claims that this waiver is not taxable in the hands of Tata Steel BSL Limited, as it was a sequela to an acquisition under the Insolvency and Bankruptcy Code (IBC) proceedings.
Tata Steel has filed a writ petition in the Bombay High Court, challenging the technical infirmities in conducting the reassessment proceedings. The company believes it has a strong case on merits and will also seek legal remedies before relevant judicial and quasi-judicial forums to contest the matter and challenge the contents of the order.
The company highlights that the income tax return of Bhushan Steel for FY 2018-19 was accepted by the income tax department in June 2020 without any demand pertaining to the waiver of loan. Tata Steel claims that in terms of the relevant provisions of the Income Tax Act, 1961, the waiver of debt cannot be treated as taxable income in the hands of Tata Steel BSL Limited at the relevant point in time.
The company’s move is aimed at contesting the reassessment order and seeking a favorable outcome, which may impact its financials and future plans. The issue remains to be resolved, and the outcome of the court case will have significant implications for Tata Steel’s financial performance and reputation.