Siemens Limited Vs ADIT (ITAT Mumbai)
MSMED Act Interest Reversal Not Taxable If Never Claimed as Deduction—Matter Remanded for Verification
The Mumbai ITAT (G Bench) allowed the appeal of Siemens Limited for AY 2020-21 for statistical purposes, directing verification of an adjustment made by CPC on account of interest under section 23 of the MSMED Act.
The Tribunal held that:
- The CPC had made an upward adjustment of ₹6.62 crore while processing the return u/s 143(1), treating the reversal of MSMED interest provision as taxable.
- The assessee contended that although a provision for MSMED interest was created in the books (as required by law), it was never claimed as a deduction while computing taxable income, and was later reversed when suppliers did not claim interest.
- If the provision was not claimed as a deduction, its subsequent reversal cannot result in any addition to income.
- The issue is covered by the coordinate bench decision in Sri Devi Tool Engineers (P.) Ltd., holding that no disallowance/addition arises on reversal of an unclaimed provision.
Directions issued:
- The AO/CPC was directed to factually verify whether the MSMED interest provision was ever claimed as a deduction.
- If not claimed, the entire addition must be deleted.
- Reasonable opportunity of hearing must be granted to the assessee.
- Accordingly, the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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