Paradeep Phosphates Limited has announced a significant development regarding its material litigation concerning an income tax demand. The Assistant Commissioner of Income Tax, Circle-1(1), Bhubaneswar, has passed a rectification order under Section 154 of the Income-tax Act, 1961. This order effectively quashes the income tax demand of ₹20.61 crore that was previously raised for Assessment Year 2020-21.

Rectification Order Details

The tax authority had initially raised the demand on February 28, 2025, citing adjustments related to higher carry forward loss and MAT credit for earlier years. Following the assessment, the company had filed an appeal before the First Appellate Authority on April 3, 2025. While the appeal was pending disposal, the company filed an application under Section 154 before the Assistant Commissioner of Income Tax.

Financial Impact

The rectification order, dated May 20, 2026, has resulted in a favorable outcome for Paradeep Phosphates. The authority not only quashed the demand but also sanctioned a refund of ₹20.57 crore to the company. This development resolves the litigation concerning the tax demand for the specified assessment year.

Litigation Status Summary

Paradeep Phosphates Limited announced on May 19, 2026, that the National Company Law Appellate Tribunal (NCLAT) has rejected its appeal regarding an Entry Tax exemption claim in Odisha. The dispute pertained to the company's eligibility for tax remission under a rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) for the period from 2007 to 2014.

The NCLAT order, dated May 18, 2026, upheld the previous ruling by the National Company Law Tribunal (NCLT). Consequently, the company's plea for exemption under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), has been dismissed. Paradeep Phosphates indicated that it is taking appropriate steps to file an appeal against the order before the Supreme Court.

Financial Implications and Provisions

Regarding the financial impact, the company disclosed that it has already fully provided for the liability in its books. The total demand and liability associated with the litigation amount to ₹76 crore. Against this, the company has deposited ₹26 crore under protest.

The company maintains its position that it is eligible for remission of Entry Tax for the period from 2007 to 2011, during which it was classified as a sick industrial company. It exited the sick industrial status following a BIFR order dated August 16, 2011. The company considers the deposit made to be adequate against the liability pertaining to the period from 2011 to 2014.

Future Course of Action

Paradeep Phosphates stated that no material impact on its financials is expected currently due to this development. Any additional impact arising from interest on the unpaid amount is also not anticipated to be material. The company is currently evaluating its legal options to challenge the NCLAT's decision at the Supreme Court.