Chambal Fertilisers has received an order from the Income Tax Department levying a penalty of Rs. 1,35,24,064/- related to the Assessment Year 2020-21. The penalty pertains to the alleged wrong claim of deduction concerning education cess, which was previously allowed by a Rajasthan High Court ruling that was later reversed by a retrospective amendment in the Finance Act, 2022. The company intends to challenge this order on merit.
Details of Tax Authority Order
Chambal Fertilisers and Chemicals Limited has disclosed the receipt of an order from the Assessment Unit of the Income Tax Department dated March 6, 2026. This communication concerns an order passed under Section 270A of the Income Tax Act, 1961, resulting in the imposition of a penalty amounting to Rs. 1,35,24,064/-.
Alleged Contravention and Background
The penalty has been imposed for the alleged wrong claim of deduction related to education cess in the income tax return filed for Assessment Year 2020-21. The company had initially claimed this deduction based on a favorable decision by the Hon’ble Rajasthan High Court (Appeal No. 52/2018 for AY 2009–10, dated July 31, 2018), which held that such cess paid alongside income tax was allowable.
Subsequently, the Finance Act, 2022, introduced a retrospective amendment that reversed the aforementioned High Court ruling. Following this amendment, the Company reportedly surrendered the claim for the deduction of Education Cess and Secondary & Higher Education Cess and paid the applicable tax.
Financial Impact and Future Action
The company states that there is no impact on financial, operation or other activities, save for the exact amount of the penalty levied, which is Rs. 1,35,24,064/-. Furthermore, the management believes the Company has a strong basis to contest the order on its merits and intends to challenge the penalty order at the appropriate appellate forum.
Source: BSE
