Supreme Court Verdict Rocks Bhushan Power Takeover — What’s the Tax Impact?
In a landmark judgment, the Supreme Court recently annulled the ₹19,350 crore JSW Steel acquisition of Bhushan Power & Steel under the IBC framework. This ruling, which rewrites one of India’s biggest insolvency resolutions, has left tax professionals, lenders, and corporate groups asking one key question:
What’s the income tax impact now?
Let’s break it down for you — legally, financially, and practically.
What Did the Supreme Court Actually Say?
- The JSW-Bhushan Power deal under Section 31 of IBC was overturned.
- Reason: Allegations of fraud and suppression of facts.
Legal Reference: SC Judgment in Venus Recruiters Pvt Ltd vs Union of India (2024) with extension from Bhushan Power case docket.
Key Income Tax Impact Areas to Watch
| Area Affected | What Changes Now? | Income Tax Implications |
|---|---|---|
| Debt Waiver | Previously waived off as part of resolution plan | May now be taxable under Section 41(1) as remission |
| JSW’s Acquisition Cost | Claimed as capital asset under IBC | Could be disallowed as cost if deal is invalid |
| Set-off of Losses | Bhushan’s old losses carried forward | Likely disallowed under Section 79 if ownership invalid |
| Bad Debt by Banks | Already claimed under I-T Act provisions | May be reopened or disputed by Assessing Officer |
| Capital Gains for JSW | No gain now as deal is nullified | Reverse entries may impact computation |
| Depreciation Claimed | If assets were used post takeover | Potential disallowance from prior AYs |
CBDT Circulars & Past Guidance
- CBDT Circular No. 9/2019: On taxation of waiver of loans.
- CBDT Circular No. 7/2020: Clarifying Section 79 restriction on carry forward of losses.
Expert Insight: What Taxpayers Should Prepare For
“This is uncharted territory. Both parties — JSW and lenders — must prepare for retrospective adjustments in tax audits. Tax authorities may invoke Section 263 or 147 to reopen past assessments,”
— Amit Singhal, CA & IBC Expert, Delhi
Pro Tip:
Companies involved in IBC-related takeovers must now include a tax indemnity clause in resolution plans.
FAQs on Income Tax and IBC Annulments
Q1. Will Bhushan Power’s previous tax returns be reopened?
Yes, since ownership is in question, past filings post-resolution may be invalid.
Q2. Can banks reclaim bad debt write-offs?
Likely not, but ITD may challenge write-offs as premature.
Q3. What should JSW Steel do now?
Consider filing revised returns or prepare for scrutiny under Sections 147/148.
Final Thoughts: Brace for Reassessment
For companies, lenders, and consultants, the income tax impact isn’t just academic — it could trigger reassessments, penalties, and litigation.
Summary
The Supreme Court annulled JSW’s takeover of Bhushan Power under IBC. This raises serious income tax implications — debt waivers may now be taxable, losses disallowed, and past claims reopened. Businesses must brace for scrutiny and reassessment risks. Here’s how to navigate it.