Tata Steel gets notice over ₹25,000 cr. tax waiver, moves Bombay High Court

Tata Steel on Friday said it has received an order for reassessing taxable income for financial year 2018-19 and increasing the taxable amount by over ₹25,000 crore, and the company has moved the Bombay High Court against the reassessment.

Tata steel said in a stock exchange filing that the assessment order came on March 31 this year, following a show cause notice issued on March 13 by the Assessing Officer, Office of the Deputy Commissioner of Income Tax, Circle 2(3)(1), Mumbai.

The March 13 notice had sought further documents related to the waiver of Rs 25,185.51 crore in FY19 for the purpose of reassessment of taxable income for AY 2019-20.

Meanwhile on March 24, the company has filed a writ petition in the Bombay High Court “challenging technical infirmities in conducting the reassessment proceedings”.

Explaining the issue, the company said it had acquired erstwhile Bhushan Steel Limited (renamed as Tata Steel BSL Limited) in May 2018 through insolvency proceedings.

Consequent to this acquisition, a debt of ₹25,185.51 crore was waived off in favour of Tata Steel BSL Limited (TSBSL).

Later, TSBSL and Bamnipal Steel Limited got amalgamated into and with Tata Steel Limited effective November 2021. The appointed date for the amalgamation was April 1, 2019.

“It is pertinent to note 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 said in the latest statement.

It said the company has examined the matter and “believes that it has a strong case on merits apart from the technical infirmities in the order for which the company is already before the High Court of Bombay”.

In addition to the writ petition, the company said, it will also “seek appropriate legal remedies before relevant judicial/quasi-judicial forums contesting the matter on merits and challenging the contents of the order passed by the Assessing Officer”.

According to the company, in terms of the relevant provisions of the Income Tax Act, 1961, “waiver of debt cannot be treated as taxable income in the hands of TSBSL at the relevant point in time, more so when such waiver was a sequel to an acquisition under the IBC proceedings”.