Tata Steel announced receiving a favorable order from the Income Tax Appellate Tribunal concerning tax demands related to interest expenditure claims from FY2008 to FY2015. The ruling allows the deduction, leading to a significant reduction in the aggregate tax exposure from approximately ₹1,901 crore to around ₹1,686 crore. This outcome is expected to have a persuasive impact on co-related pending litigations concerning the same issue.
Update on Material Tax Litigation
Further to prior disclosures concerning material tax litigation, Tata Steel has received a significant development. The Company was notified on February 27, 2026, of an Order dated February 20, 2026, issued by the Income Tax Appellate Tribunal (‘Authority’). This ruling pertains to disallowances made regarding interest expenditure deductions claimed under Section 36(1)(iii) of the Income Tax Act, 1961, for the financial year FY2008.
Background of the Dispute
The initial dispute centered on the disallowance of an interest deduction claim amounting to ₹518.76 crore for FY2008, relating to loans borrowed for the acquisition of Corus Group Plc. Similar disallowances were imposed for subsequent years through FY2015. The total aggregate tax exposure stemming from this issue across the entire period (FY2008 to FY2015) was estimated to be approximately ₹1,901 crore. An appeal against the original order was filed by the Company on May 10, 2016.
Impact of the Favorable Order
The final hearing for the matter concluded in November 2025. The favorable Order received allows the claim for deduction of interest expenditure. Consequently, the total tax exposure against the Company is set to decrease from approximately ₹1,901 crore to approximately ₹1,686 crore. This represents a reduction in contingent liability of about ₹205 crore on this specific matter.
Next Steps and Future Implications
The Assessing Officer is required to give effect to this Tribunal Order through a subsequent order. The Company plans to implement the necessary adjustments in its contingent liability disclosures within the financial statements for the fiscal year FY2027. Management believes this successful resolution will serve as persuasive precedent for other co-related tax litigations pending for the period FY2009 to FY2015 concerning the same underlying issue.
Source: BSE
