Mumbai | ApxNews.in – Tata Steel has approached the Bombay High Court to challenge a reassessment order by the Income Tax Department, which adds over ₹25,000 crore to its taxable income for FY 2018-19. The tax dispute stems from the acquisition of the debt-ridden Bhushan Steel Limited (later renamed Tata Steel BSL Limited) through the Insolvency and Bankruptcy Code (IBC) process in May 2018.
According to the company’s filing on the stock exchanges, the reassessment order was received on March 31, 2025, just weeks after a show cause notice dated March 13. The notice was issued by the Deputy Commissioner of Income Tax, Circle 2(3)(1), Mumbai, seeking documentation related to the ₹25,185.51 crore debt waiver granted during the acquisition.
What Sparked the Reassessment?
When Tata Steel BSL was acquired in 2018, a massive debt of ₹25,185.51 crore was written off. This waiver became the central focus of the tax department’s reassessment for Assessment Year (AY) 2019-20.
However, Tata Steel highlighted that the original Income Tax Return (ITR) for FY 2018-19, filed by Bhushan Steel, had been accepted without any objections back in June 2020 — raising questions on why the waiver is being scrutinized now.
Legal Battle Begins
On March 24, Tata Steel filed a writ petition in the Bombay High Court, contesting the procedural and legal basis of the reassessment. The company claims there are technical infirmities in how the entire reassessment was conducted.
Tata Steel further stated it believes the waiver cannot be taxed under provisions of the Income Tax Act, 1961, especially since the debt cancellation occurred as part of an acquisition through IBC — which is a court-supervised resolution process, not a voluntary commercial settlement.
Company’s Stand on the Matter
Tata Steel is confident of a favorable outcome. The company maintains that the waiver of debt following an IBC acquisition should not be considered taxable income, and it is prepared to challenge the order not just on procedural grounds but also on merit.
Besides the High Court writ, the company also plans to approach appropriate judicial or quasi-judicial authorities to fully contest the reassessment.
What Happens Next?
This case could have wider implications for other companies that have acquired stressed assets under the IBC framework. A favorable verdict for Tata Steel might set a precedent reinforcing that debt waivers during insolvency resolutions should not be treated as income.
📌 Additional Insights
- Bhushan Steel was one of India’s top 12 NPAs referred to insolvency in 2017.
- Tata Steel had acquired it through Bamnipal Steel Ltd, a wholly owned subsidiary created for this acquisition.
- Later, both Bamnipal Steel and Tata Steel BSL were amalgamated into Tata Steel in 2021.
This legal tussle highlights the complexities in tax interpretation around insolvency-linked takeovers and could influence future M&A transactions in India’s distressed asset market.
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