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Facts
The assessee, Siemens Limited, is a resident corporate entity. During the processing of its income tax return for AY 2020-21, the CPC made an upward adjustment of Rs. 6,62,28,591/- on account of reversal of interest charged under Section 23 of the MSMED Act.
Held
The Tribunal noted the assessee's submission that while a provision for interest under Section 23 of the MSMED Act was made, it was not claimed as a deduction. The Tribunal directed the AO to factually verify this claim and if found to be true, no addition should be made.
Key Issues
Whether the addition on account of reversal of interest charged under Section 23 of the MSMED Act is justifiable when the assessee did not claim it as a deduction.
Sections Cited
23 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), 143(1) of the Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
(Assessment Year: 2020-21) Siemens Limited Asst. DIT, CPC Birla Aurora, Level 21, Plot No. 1080, Income Tax Department, Vs. Dr. Annie Beseant Road, Worli, Bengaluru – 560 500 Mumbai-400 030 PAN/GIR No. (Appellant) : (Respondent) Appellant by : Shri Jeet Kamdar Respondent by : Shri Arun Kanti Datta Date of Hearing : 17.12.2025 Date of Pronouncement : 05.01.2026 O R D E R
Per Saktijit Dey, Vice President:
This is an appeal by the assessee against the order dated 20.08.2025, passed by Additional/Joint Commissioner of Income Tax (Appeals), Kolkata for the assessment year (A.Y.) 2020-21.
The dispute in the present appeal is confined to addition of an amount of Rs.6,62,28,591/-, representing interest charged u/s. 23 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
Briefly stated, the facts are, the assessee is a resident corporate entity. While processing the return of income filed by the assessee u/s. 143(1) of the Act, the Centralized Processing Centre (CPC) made an upward adjustment of Rs.6,62,28,591/- on account of reversal of interest charged under MSMED Act.
Siemens Limited vs. Asst. DIT 4. Contesting the said addition, the assessee preferred an appeal before ld. first appellate authority. While deciding the issue, ld. first appellate authority sustained the addition holding that interest charged u/s. 23 of MSMED Act, being interest paid to suppliers for delay in making payments for supply of goods and services is not allowable as deduction.
Before us, ld. Counsel appearing for the assessee submitted that keeping in view the provision contained u/s. 23 of MSMED Act, the assessee creates a provision in its account towards interest payable for delay in making payment to parties supplying goods. However, in case the parties do not claim interest, it is reversed. He submitted, though the provision was made in the account, but the assessee has not claimed it as deduction. Therefore, there is no question of adding the amount on reversal. In support of such contention, ld. Counsel relied upon the decision of the co-ordinate bench in case of Sri Devi Tool Engineers (P.) Ltd. v. Assistant Director of Income-tax, CPC [2025] 175 taxmann.com 678 (Mumbai - Trib.). Thus, he submitted, the A.O. may be directed to factually verify assessee’s claim and delete the addition.
The ld. Departmental Representative (ld. DR for short) relied upon the observations of departmental authorities.
We have considered rival submissions and perused the materials on record. It is the say of the assessee before us that though it has created the provision for the interest charged u/s. 23 of the MSMED Act, however, it has not claimed it as ‘deduction’ while computing its income. Keeping in view, such submission of the assessee, we direct the A.O. to factually verify assessee’s claim and, in case, it is found that the provision made was not Siemens Limited vs. Asst. DIT claimed as ‘deduction’ and has subsequently been reversed, there cannot be any addition of the said amount. While deciding the issue, the A.O. is required to provide reasonable opportunity of being heard to the assessee. Hence, grounds are allowed for statistical purpose.