Chambal fertilisers & chemicals Limited has received a penalty order of Rs 96,86,205 from the Income Tax Department for alleged violations related to Assessment Year 2011-12. The company disclosed this development to stock exchanges on March 10, 2026, pursuant to Regulation 30 of SEBI LODR regulations.

Penalty Details and Authority

The Assessment Unit of the Income Tax Department issued the penalty order under Section 271(1)(c) of the Income Tax Act, 1961. The company received the order on March 09, 2026, with the total penalty amount aggregating to Rs 96,86,205.

Nature of Alleged Violations

The penalty stems from two specific matters related to deduction claims in the income tax return for Assessment Year 2011-12:

River Construction Expenditure Issue

The company incurred expenditure for construction of an anicut over the Parwan River to augment water supply required for manufacturing operations. Chambal Fertilisers claimed this expenditure as revenue expenditure, which was subsequently disallowed by the Assessing Officer in the regular assessment. During appellate proceedings, it was determined that the expenditure was capital in nature, and the company became eligible for depreciation from the year of capitalization.

Fertilizer Bonds Valuation Matter

The Government of India had settled part of fertilizer subsidy dues by issuing Fertilizer Bonds. When the fair market value of these bonds fell below their book value during the year, the company applied prudence principles and recognized the diminution in value in its books of account. The Assessing Officer disallowed this claim during assessment proceedings. In appellate proceedings, it was held that the deduction is allowed only in the year when the bonds are sold, not when the diminution is recognized. The loss was subsequently allowed in the year of actual sale of the bonds.

Financial and Operational Impact

The company has stated that there is no impact on its financial, operational, or other activities, except for the penalty amount mentioned above. Chambal Fertilisers maintains confidence in its position and believes it has a strong case to contest the order on merits.

Company's Response Strategy

Chambal Fertilisers and Chemicals Limited has indicated its intention to challenge the penalty order at the appropriate appellate forum. The company expressed confidence in its legal position, stating it has a good case to contest the order based on the merits of the matters involved. This disclosure was made by Tridib Barat, Vice President - Legal & Company Secretary, ensuring compliance with regulatory requirements for material developments.

Chambal Fertilisers & Chemicals Limited has received an Income Tax penalty order of Rs 1,35,24,064 from the Assessment Unit of the Income Tax Department. The company disclosed this development through a regulatory filing under Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.

Penalty Details and Background

The penalty has been imposed under Section 270A of the Income Tax Act, 1961, for an alleged wrong claim of education cess deduction in the company's income tax return for Assessment Year 2020-21. The order was received by the company on March 6, 2026.

Legal Basis for Original Claim

The company's original deduction claim was based on a favorable ruling from the Rajasthan High Court, Jaipur Bench, in its own case. In Appeal No. 52/2018 for Assessment Year 2009-10, decided on July 31, 2018, the court held that Education Cess and Secondary & Higher Education Cess paid along with income tax does not fall within the ambit of "tax" under Section 40(a)(ii) of the Income Tax Act, 1961, and is therefore allowable as deduction.

Retrospective Amendment Impact

The Finance Act, 2022 introduced a retrospective amendment that reversed the aforementioned court ruling. Following this legislative change, Chambal Fertilisers surrendered its claim for deduction of Education Cess and Secondary & Higher Education Cess and paid the applicable tax amount.

Company's Response and Financial Impact

The company has stated that there is no impact on its financial, operational, or other activities, except for the penalty amount mentioned above. Chambal Fertilisers believes it has a strong case to contest the penalty order on merits and has indicated its intention to challenge the same at the appropriate appellate forum.

Regulatory Compliance

This disclosure was made in compliance with SEBI regulations, ensuring transparency with stakeholders regarding material developments that could affect the company's operations or financial position.