What exactly does the buyer owe once the payment window under s.15 closes?
The buyer must pay within the period agreed in writing or, absent agreement, before the appointed day, and the agreed period cannot exceed forty-five days from acceptance or deemed acceptance. Once that is breached, the buyer is statutorily liable to compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. The Court directed the authorities to determine and release the interest.
Decided by the High Court (Kaushik Goswami J) on 2026-08-12, reported as WP(C) No. 8288 of 2019. It bears on section MSMED s.15, section MSMED s.16 of the Income Tax Act 1961, in How Tax Law Is Read matters.
The interest liability under s.16 is automatic and is not a matter for negotiation between the parties; it accrues by force of the statute. That is what makes the MSMED exposure asymmetrical for a buyer - the principal falls under s.43B(h) until paid, and the interest that accumulates on it is not deductible at all.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner supplier moved the High Court against State authorities in respect of delayed payment and its consequential entitlement to statutory interest under the MSMED Act 2006, the authorities not having determined or released the interest claimed.
The writ petition was disposed of with directions: the petitioner is to submit its claim for interest within one month, the respondent authorities are to verify and determine the statutory interest within two months, and the amount so determined is to be released within a reasonable period thereafter. In stating the law the Court held that s.15 casts a statutory obligation on the buyer to pay within the period agreed in writing or, in the absence of such agreement, before the appointed day (para 11), that the agreed period cannot exceed forty-five days from the date of acceptance or deemed acceptance (para 12), and that on default the buyer becomes statutorily liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (para 13).
The Court treated ss.15 and 16 as a self-executing scheme: s.15 fixes the outer date for payment, with the proviso capping what the parties may agree, and s.16 attaches the consequence without any further act of the buyer or election by the supplier (paras 11 to 13). Since the liability arises by operation of the statute, the only live question was quantification, and the Court left that to the authorities under a timetable rather than working it out itself.
the period agreed upon in writing cannot exceed forty-five days from the date of acceptance or the date of deemed acceptance
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Handle my notice → Ask a CA on WhatsAppThe buyer must pay within the period agreed in writing or, absent agreement, before the appointed day, and the agreed period cannot exceed forty-five days from acceptance or deemed acceptance. Once that is breached, the buyer is statutorily liable to compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. The Court directed the authorities to determine and release the interest. This was decided by the High Court (Kaushik Goswami J) and bears on section MSMED s.15, section MSMED s.16 of the Income Tax Act 1961. It is reported as WP(C) No. 8288 of 2019. The interest liability under s.16 is automatic and is not a matter for negotiation between the parties; it accrues by force of the statute. That is what makes the MSMED exposure asymmetrical for a buyer - the principal falls under s.43B(h) until paid, and the interest that accumulates on it is not deductible at all. If it applies to you, the first step is this: Compute the exposure on the statutory basis - three times the bank rate, compounded monthly - and not on whatever rate the purchase terms recite.
The petitioner supplier moved the High Court against State authorities in respect of delayed payment and its consequential entitlement to statutory interest under the MSMED Act 2006, the authorities not having determined or released the interest claimed. The matter was decided on 2026-08-12 by the High Court (Kaushik Goswami J). On those facts the High Court held as follows. The writ petition was disposed of with directions: the petitioner is to submit its claim for interest within one month, the respondent authorities are to verify and determine the statutory interest within two months, and the amount so determined is to be released within a reasonable period thereafter. In stating the law the Court held that s.15 casts a statutory obligation on the buyer to pay within the period agreed in writing or, in the absence of such agreement, before the appointed day (para 11), that the agreed period cannot exceed forty-five days from the date of acceptance or deemed acceptance (para 12), and that on default the buyer becomes statutorily liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (para 13).
The Court treated ss.15 and 16 as a self-executing scheme: s.15 fixes the outer date for payment, with the proviso capping what the parties may agree, and s.16 attaches the consequence without any further act of the buyer or election by the supplier (paras 11 to 13). Since the liability arises by operation of the statute, the only live question was quantification, and the Court left that to the authorities under a timetable rather than working it out itself. In the words reproduced by the source cited on this page: "the period agreed upon in writing cannot exceed forty-five days from the date of acceptance or the date of deemed acceptance"
It was decided by the High Court on 2026-08-12 and is reported as WP(C) No. 8288 of 2019. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section MSMED s.15, section MSMED s.16, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was disposed of with directions: the petitioner is to submit its claim for interest within one month, the respondent authorities are to verify and determine the statutory interest within two months, and the amount so determined is to be released within a reasonable period thereafter. In stating the law the Court held that s.15 casts a statutory obligation on the buyer to pay within the period agreed in writing or, in the absence of such agreement, before the appointed day (para 11), that the agreed period cannot exceed forty-five days from the date of acceptance or deemed acceptance (para 12), and that on default the buyer becomes statutorily liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (para 13). It arises in How Tax Law Is Read matters, on section MSMED s.15, section MSMED s.16 of the Income Tax Act 1961, and was decided by Kaushik Goswami J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the date of acceptance or deemed acceptance as the starting point; it is the fulcrum of both limbs of s.15. Where a public sector buyer refuses to quantify, this judgment shows the writ route to a direction that it do so. Add the s.16 interest back in the computation under the normal provisions; see Bosch Ltd v ACIT.
Searched for later treatment; none was found. That is not the same as a source affirming it. Pronounced 12 August 2026. No later decision citing it was located, which is expected at this distance. No decision doubting it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment states the scheme of ss.15 and 16 and gives directions for quantification; it decides nothing about whether a purchase order is an 'agreement in writing' for the purposes of s.15, and it is not authority on that. The petition was filed in 2019 and disposed of in 2026; the judgment does not explain the interval. It does not mention the Income-tax Act. Five directions were given and three are recorded here; the remaining two were not recovered in the Court's own words. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was disposed of with directions: the petitioner is to submit its claim for interest within one month, the respondent authorities are to verify and determine the statutory interest within two months, and the amount so determined is to be released within a reasonable period thereafter. In stating the law the Court held that s.15 casts a statutory obligation on the buyer to pay within the period agreed in writing or, in the absence of such agreement, before the appointed day (para 11), that the agreed period cannot exceed forty-five days from the date of acceptance or deemed acceptance (para 12), and that on default the buyer becomes statutorily liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (para 13).
TaxSphere, “SRK Metals and Plastics (P) Ltd v State of Assam”, https://taxnotice.vittsphere.com/caselaw/case/srk-metals-v-state-of-assam-s15-s16-statutory-interest-determination/ (validity last checked 2026-09-17)
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How does s.15 actually work - fifteen days, or forty-five, and what if the supplier registered after the invoices?
The buyer says the 1 September 2021 Office Memorandum takes your trader-supplier outside the delayed-payment machinery. Is that right?
You paid interest on a delayed payment to an MSME supplier. Can you claim it?
MSMED interest is disallowed under the normal provisions. Does it also have to be added back to book profit?
