Tata Steel gets relief in ₹427 crore tax dispute, exposure set to fall to ₹1,259 crore

Domestic steel major Tata Steel Ltd on Tuesday (September 29) said it has received a favourable order from the Income Tax Appellate Tribunal (ITAT) for financial year 2009, allowing its claim for deduction of interest expenditure and reducing its tax exposure on the matter by around ₹427 crore to ₹1,259 crore.

"After several hearings, on February 27, 2026, the company received a favourable order dated February 20, 2026 from the Authority for FY2008 (‘Order 1’) wherein the claim of deduction for interest expenditure was allowed. The tax exposure for FY2008 is ₹215 crore.

Accordingly, the tax exposure against the company will get reduced from ₹1,901 crore to ₹1,686 crore once the Assessing Officer will give effect to this Order 1 through a consequential separate order. The company has made necessary disclosures in this regard to the stock exchanges on February 28, 2026," Tata Steel said in a regulatory filing.

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The tax dispute relates to the disallowance of interest expenditure under Section 36(1)(iii) of the Income Tax Act, 1961, on loans borrowed and used by the company for the acquisition of Corus Group Plc, its foreign subsidiary. The aggregate tax exposure for the issue for FY2008 to FY2015 was around ₹1,901 crore.

The company received the favourable order, dated September 18, 2026, on September 28. The FY2009 tax exposure is around ₹427 crore.

The Deputy Commissioner of Income Tax, Circle 2(3)(1), Mumbai, had, through an order dated January 10, 2014, disallowed Tata Steel's claim of ₹813.65 crore towards deduction of interest expenditure under Section 36(1)(iii). The company filed an appeal against the order before the ITAT on February 4, 2014.

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The matter was heard over multiple hearings, with the final hearing taking place in June 2026. The ITAT allowed the interest deduction claim for FY2009, following its earlier favourable order for FY2008.

Tata Steel had received the FY2008 order, dated February 20, 2026, on February 27, 2026. That order allowed the company's interest expenditure deduction claim and covered a tax exposure of around ₹215 crore.

Following the FY2008 order, the company's tax exposure was expected to fall from around ₹1,901 crore to ₹1,686 crore once the Assessing Officer gives effect to the order through a separate consequential order.

With the latest FY2009 order, the exposure is expected to fall further from around ₹1,686 crore to ₹1,259 crore, once the Assessing Officer gives effect to the order through a separate consequential order.

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Tata Steel said it will subsequently make the necessary adjustments to the contingent liability reported in the notes to its financial statements. The company also said it believes the two orders will have a persuasive impact on related pending litigations for FY2010 to FY2015 concerning the same issue.

Shares of Tata Steel Ltd ended at ₹187.95, up by ₹1.95, or 1.05%, on the BSE.