Chambal Fertilisers and Chemicals has disclosed an order passed by the Income Tax Department, levying an aggregate penalty of ₹58,27,971/- under Section 270A. The penalty relates to the alleged wrong claim of deduction for Education Cess in the tax return for AY 2017-18. Although the company had initially claimed the deduction based on a favorable High Court ruling, the subsequent retrospective amendment by the Finance Act, 2022, reversed the standing. The company plans to contest this order at the appellate forum.
Disclosure of Tax Assessment Order
Chambal Fertilisers and Chemicals Limited has informed the stock exchanges regarding an order received from the Income Tax Department’s Assessment Unit on February 25, 2026. The order pertains to the Assessment Year 2017-18.
Penalty Imposed
The Assessing Officer passed an order under Section 270A of the Income Tax Act, 1961, levying an aggregate penalty amounting to Rs. 58,27,971/-. This penalty stems from the alleged wrong claim of deduction concerning the Education Cess in the relevant income tax return.
Basis of Disputed Claim
The violation cited involves the deduction of Education Cess and Secondary & Higher Education Cess, which the Company had claimed based on the decision issued by the Hon’ble Rajasthan High Court, Jaipur Bench (Appeal No. 52/2018 for AY 2009-10, dated 31.07.2018). This ruling held that the cess paid did not fall within the ambit of “tax” under Section 40(a)(ii) and was thus allowable as a deduction.
Subsequent Legal Reversal
The basis for the penalty arises because the Finance Act, 2022, introduced a retrospective amendment that reversed the favorable High Court ruling. Following this legislative change, the Company subsequently surrendered the claim of deduction for the Education Cess and paid the applicable tax.
Impact and Next Steps
The disclosure confirms that there is no material impact on the financial or operational activities of the Company, save for the imposition of the aforementioned penalty amount. Management confirms that the Company maintains a strong case on merits and therefore intends to challenge the order at the appropriate appellate forum.
Source: BSE
