United Breweries Limited announced an update regarding a tax litigation concerning the UBL Gratuity Trust’s AY 2022-23 assessment. Following a High Court remand, the Income Tax Department (NFAC) issued a fresh order, granting significant relief by reversing the disallowance of the entire capital contribution. However, a partial exemption disallowance remains, reducing the total contingent liability from an initial demand of INR 1,024,400,466 to INR 3,21,09,412. The Trust plans to appeal the remaining demand.
Update on Gratuity Trust Tax Litigation
United Breweries Limited (UBL) has provided an update, pursuant to mandatory disclosure requirements, regarding the outcome of a tax litigation involving the UBL Gratuity Trust concerning its return for AY 2022-23. The dispute originated when the National Faceless Assessment Centre (NFAC) initially disallowed the entire capital contribution, resulting in a total income assessment of INR 1,087,398,840 and a subsequent tax demand notice of INR 1,024,400,466 issued on March 20, 2024.
High Court Intervention and Fresh Assessment
The Trust had previously filed a writ petition in the Karnataka High Court, which subsequently remanded the matter back to the NFAC for fresh consideration. Following this directive, the NFAC re-examined the case and passed a new order on February 12, 2026. Crucially, the NFAC granted relief by reversing the disallowance of the entire capital contribution.
Revised Financial Implications
Despite the major relief, the NFAC sustained the disallowance concerning the exemption of INR 6,25,18,975 due to a misconstruction of facts. This resulted in a substantial reduction of the contingent liability. The revised contingent liability, encompassing both tax and interest, is now quantified at INR 3,21,09,412. This represents a reduction from the original demand of INR 1,024,400,466.
Next Steps for the Trust
UBL stated that the Trust possesses strong arguments to defend the remaining demand. Accordingly, the Trust intends to challenge the fresh assessment order by filing an appeal before the Commissioner of Income Tax (Appeals).
Source: BSE
