JSW Steel faces tax benefit reversal after Supreme Court scraps Bhushan Power takeover
JSW Steel
is facing a possible reversal of
tax benefits
availed as part of the acquisition of
Bhushan Power and Steel
(
BPSL
), following its 2020 takeover of the bankrupt company being scrapped by the
Supreme Court
, said people aware of the matter.
Acquisitions under the Insolvency and Bankruptcy Code (IBC) allow offsetting of past losses of the insolvent company against profits.
Now, the Income Tax Department is planning to reopen Bhushan Power's assessment, said people close to the matter.
'Tax benefit is a very big consideration under IBC,' said Girish Vanvari, founder of advisory firm
Transaction Square
.
Losses of ₹7,000 crore
'Several promoters have acquired companies for the purpose of availing of it,' said Vanvari.
JSW Steel
had informed the Chief Commissioner at the time of the acquisition — undertaken by way of a ₹19,350-crore resolution plan — that it would be availing of the benefit, said the people cited. BPSL's losses amounted to around ₹7,000 crore, they said.
Soon after the takeover, BPSL turned profitable. It offset earlier losses and unabsorbed depreciation over FY22, FY23 and FY24, according to account statements, when it posted profits of ₹4,258 crore, ₹160 crore and ₹674 crore, respectively.
But on May 2, the Supreme Court rejected JSW Steel's resolution plan and ordered BPSL's liquidation, citing lack of compliance and other issues.
According to IBC norms, the corporate debtor — in this case, Bhushan Power — can avail of tax benefits if there is a change of shareholding pursuant to a resolution plan, said Vanvari of Transaction Square. 'As an extension of that benefit, losses of the corporate debtor can be carried forward and set off against future tax liabilities,' he said.
Bhushan Power became a subsidiary of JSW Steel in FY22. While the tax benefits were claimed by the former, JSW benefitted indirectly as it held 83% in the company.
Notably, BPSL also incurred an expenditure of ₹3,640 crore to increase steel-making capacity at its Odisha facility after the takeover, its financial statements show.
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Such a dedicated body would bring several advantages: it would build expertise in restructuring, corporate valuation, accounting, and legal compliance for merger schemes, leading to more consistent and informed decisions; it would be more accessible; and it could maintain faster turnaround times. In essence, unlisted companies would get a regulator dedicated to their restructuring needs, ensuring they are not left behind in the push for efficiency. ADVERTISEMENT For listed companies, a compelling case can be made that the final approval of merger/demerger schemes should be handled by the SEBI, without requiring NCLT intervention. SEBI is already deeply involved in the process. As the capital markets regulator, it reviews and comments on every scheme of arrangement involving a listed firm. No listed company merger or demerger can even be filed at NCLT without prior SEBI approval and a compliance certificate from the stock exchange. In other words, SEBI serves as a first-line gatekeeper. SEBI has the expertise and mandate to protect investors, which is the core concern in listed-company restructurings. The NCLT's authority in such cases is primarily to act as a watchdog, ensuring the procedure was fair, minority shareholders and creditors were not short-changed, and all legal formalities are in order. Thus, by the time a scheme has passed through SEBI and shareholder approvals, the role left for NCLT is quite limited and arguably adds redundant delay.A useful precedent exists in India's banking sector. Bank mergers do not go to NCLT at all. They are governed by a separate mechanism under the Banking Regulation Act, wherein the final authority to sanction the merger lies with the RBI, not a court or tribunal. This framework has worked well to facilitate faster consolidation in the banking industry, a testament to the efficacy of this could play an analogous role for listed non-bank companies, where it could act as a nodal authority, cutting out several months of waiting and procedural hearings, leading to shorter timelines for deal closure, reduced legal uncertainty, and one less layer of regulatory cost for companies. Delegating listed-company schemes entirely to SEBI, expanding fast-track merger eligibility, and creating a dedicated Corporate Restructuring Authority under the Ministry of Corporate Affairs for unlisted firms would not only cut down on procedural bottlenecks but also align India's business landscape with the regulatory agility of leading economies. This must be a timely reform to power the next phase of India's growth story.
