What the courts have decided on section MSMED s.16, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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SRK Metals and Plastics (P) Ltd v State of Assam
High CourtHelps taxpayerNo later treatment found
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.
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Dhruv Anand v State of U.P.
High CourtCuts both waysHigh Courts differ
The buyer says the 1 September 2021 Office Memorandum takes your trader-supplier outside the delayed-payment machinery. Is that right?
The Allahabad High Court held it is not. The Office Memorandum relied on is specifically in respect of lending and not for any other purpose, and where the dispute concerns a supply of goods for which payment has been delayed the memorandum is 'not at all applicable'. The remedy is the one the MSMED Act provides under ss.15, 17 and 18, and the criminal proceeding against the buyer was quashed on that footing.
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Anupam Industries Ltd v State Level Industry Facilitation Council
High CourtCuts both waysNo later treatment found
How does s.15 actually work - fifteen days, or forty-five, and what if the supplier registered after the invoices?
Section 15 obliges the buyer to pay by the date agreed in writing and, where there is no such agreement, before the appointed day, which is fifteen days from acceptance or deemed acceptance; the proviso caps any agreed period at forty-five days. On the facts, the supplier's registration post-dated the invoices by a wide margin, the invoices running from 17 May 2013 to 15 July 2015 against registration with effect from 31 December 2016.
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Bosch Ltd v ACIT
ITATHelps departmentNo later treatment found
You paid interest on a delayed payment to an MSME supplier. Can you claim it?
No, and the Tribunal decided it by adoption rather than by reasoning. Counsel accepted that an identical issue had arisen in the assessee's own case for assessment year 2010-11, and the Bench reproduced its earlier order of 16 September 2020, which held that s.23 of the MSMED Act specifically provides that interest paid to micro, small and medium enterprises on account of delayed payment is not allowable as a deduction from income, that such interest is penal in nature and so is otherwise not allowable under s.37, and that s.24 of that Act has overriding effect to the extent of inconsistent provisions in any other law. The Bench's own holding is one sentence at para 73: following that order, it dismissed Ground No.11.
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Landis+Gyr Ltd v DCIT
ITATHelps taxpayerNo later treatment found
MSMED interest is disallowed under the normal provisions. Does it also have to be added back to book profit?
No - and the Tribunal decided it by adoption. It noted that the issue raised in Ground No. 10 had been decided by the Tribunal in the assessee's own case by its consolidated order dated 13 September 2017 for assessment years 2010-11 and 2011-12, reproduced that order, and allowed the ground on the strength of it. The reasoning reproduced is that s.23 of the MSMED Act operates on the computation of income under the normal provisions and not on the computation of book profit under s.115JB, and that a provision for interest payable to MSMED suppliers, being an ascertained liability, does not have to be added back.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
