The present appeal was filed by Siemens Limited before the Income Tax Appellate Tribunal, Mumbai Bench, against the order dated 20.08.2025 passed by the Additional/Joint Commissioner of Income Tax (Appeals) for the Assessment Year 2020-21

The dispute in the appeal was limited to an addition of ₹6,62,28,591 made while processing the return of income under section 143(1) of the Income-tax Act, 1961. The said addition represented reversal of interest provided under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

The assessee, a resident corporate entity, had created a provision in its books of account towards interest payable to suppliers for delay in payment, as mandated under the MSMED Act. However, where such interest was not claimed by the suppliers, the provision was reversed. While processing the return, the Centralised Processing Centre (CPC), Bengaluru treated the reversal of such provision as taxable and made an upward adjustment.

The first appellate authority upheld the addition on the ground that interest payable under section 23 of the MSMED Act is not allowable as a deduction under the Income-tax Act.

Before the Tribunal, the assessee submitted that although a provision for MSMED interest was created in the books, the same was never claimed as a deduction while computing taxable income. Consequently, the subsequent reversal of such provision could not give rise to any taxable addition. Reliance was placed on the coordinate bench decision in Sri Devi Tool Engineers (P.) Ltd. v. ADIT, CPC, wherein a similar issue was decided in favour of the assessee.

After considering the submissions and examining the record, the Tribunal observed that if the provision created for MSMED interest was not claimed as a deduction and was later reversed, no addition could be made merely on account of such reversal.
The Tribunal directed the Assessing Officer to verify the factual position and, if the assessee’s claim was found to be correct, to delete the addition after providing reasonable opportunity of being heard.
Accordingly, the appeal was allowed for statistical purposes

SOURCE LINK   https://itat.gov.in/public/files/upload/1767676551-eJVJse-1-TO.pdf

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