Kalpataru Projects International Limited (KPIL) has received a significant tax relief as the Income Tax Appellate Tribunal (ITAT) cancelled a tax demand of ₹81.53 crore for the Assessment Year 2019-20. This favorable ruling not only eliminates the substantial tax liability but also makes the company eligible for a refund of ₹7.35 crore.

Details of the Tax Relief

The company disclosed this development in a regulatory filing to the stock exchanges. According to the filing, the Hon'ble Deputy Commissioner of Income Tax, Central Circle-3(3), Mumbai (DCIT) issued an Order Giving Effect (OGE) to the order passed by the Hon'ble Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Year 2019-20.

Financial Implications

The OGE has resulted in two significant outcomes for Kalpataru Projects:

1. Cancellation of Tax Demand: The tax demand of ₹81.53 crore for AY 2019-20 has been set aside.
2. Refund Eligibility: The company is now eligible for a refund of ₹7.35 crore.

Recent Tax-Related Developments

This latest ruling follows a series of tax-related developments for Kalpataru Projects:

• The company received a rectification order for AY 2020-21, reducing the demand from ₹38.51 crore to ₹25.38 crore.
• KPIL reported that the CIT(A) had passed orders for AY 2018-19 to AY 2020-21, providing major relief to the company.
• Similar relief was granted for AY 2013-14 to AY 2015-16 and AY 2017-18.

Company's Stance

While the company has received favorable outcomes in most cases, it maintains a cautious approach. For instances where the CIT(A) has not fully accepted the company's position, Kalpataru Projects has stated its intention to contest these matters before higher appellate authorities, citing strong legal grounds.

The cancellation of the ₹81.53 crore tax demand and the potential refund of ₹7.35 crore represent a positive development for Kalpataru Projects International Limited, potentially improving its financial position and reducing tax-related uncertainties.

Kalpataru Projects International Limited (KPIL) has encountered a setback in its ongoing Goods and Services Tax (GST) dispute, as the Appellate Authority upheld a penalty of INR 3.72 crores against the company. The decision, which KPIL received on September 11, stems from a mismatch in Input Tax Credit (ITC) for the financial year 2017-18.

GST Dispute Details

The controversy centers around a discrepancy between the ITC availed in GSTR-3B and the ITC available in GSTR-2A for FY 2017-18. Initially, the GST Authority had demanded a GST amount of INR 3.72 crores, along with an equivalent penalty of INR 3.72 crores, plus applicable interest.

Company's Response

KPIL maintains a strong stance on its defense, asserting that the order was issued without due consideration of the company's reply and documentary evidence. In response to this unfavorable ruling, the company has announced its intention to file a further appeal to a higher appellate authority within the prescribed timelines.

Financial Impact

Despite the substantial sum involved, KPIL has previously stated that the tax and penalty do not have a significant impact on its operations. This assertion suggests that the company is well-positioned to manage the financial implications of the dispute while pursuing legal remedies.

Broader Tax Challenges

The GST dispute is not the only tax-related challenge KPIL is currently navigating. According to the LODR data, the company has been dealing with income tax reassessments for the assessment years 2013-14 to 2020-21, following a search conducted in August 2023. While KPIL has received favorable outcomes in some instances, including a reduction of a INR 95.83 crore demand to nil for AY 2016-17, the company continues to address various tax matters through appeals and rectification applications.

Looking Ahead

As Kalpataru Projects International Limited prepares to contest the GST penalty at a higher appellate level, the company's ability to manage these regulatory challenges will be closely watched by investors and industry observers. The outcome of this appeal, along with the resolution of other ongoing tax disputes, could have implications for the company's financial statements and operational strategies in the coming quarters.

KPIL's proactive approach in addressing these tax issues, coupled with its assertion of strong grounds for defense, demonstrates the company's commitment to resolving regulatory matters while maintaining its focus on core business operations.