Sapphire Foods India Limited has achieved a significant legal victory in its tax dispute, with the Income Tax Appellate Tribunal (ITAT) delivering a favourable ruling that substantially reduces the company's interest liability under the Income Tax Act. The tribunal's decision, announced on November 7, 2025, has resulted in considerable financial relief for the quick service restaurant operator.

Tribunal Ruling Details

The Income Tax Appellate Tribunal, Mumbai, ruled in favour of Sapphire Foods, determining that interest under section 201(1A) of the Income Tax Act, 1961, should be restricted only up to the date of actual payment of tax. This interpretation significantly limited the company's exposure to interest charges on Tax Deducted at Source (TDS) matters.

The Assessing Officer (TDS) subsequently passed the Order Giving Effect (OGE) on December 30, 2025, implementing the tribunal's decision across multiple assessment years.

Financial Impact

The tribunal's ruling has delivered substantial financial benefits to Sapphire Foods across seven assessment years:

The dramatic reduction from ₹17.04 crores to ₹25.13 lakhs represents a saving of approximately ₹16.79 crores for the company.

Legal Background

The current development follows the company's earlier intimation dated June 26, 2025, regarding the receipt of an order under section 250 from the Office of the Commissioner of Income Tax, Appeal Addl/JCIT(A), Ranchi. Sapphire Foods had subsequently filed an appeal at the Income Tax Appellate Tribunal in Mumbai challenging the original assessment.

Regulatory Compliance

Sapphire Foods has disclosed this development under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ensuring transparency with stakeholders regarding material legal proceedings. The company confirmed that the litigation does not involve key management personnel, promoters, or ultimate persons in control, and no settlement terms or compensation payments were required.

This favourable tribunal ruling provides significant financial relief to Sapphire Foods and resolves a long-standing tax dispute spanning multiple assessment years, potentially improving the company's cash flow position and reducing contingent liabilities.

Sapphire Foods India Limited , the operator of KFC and Pizza Hut restaurants in India and Sri Lanka, has reported a mixed performance for the second quarter, with consolidated revenue growing 7% year-on-year to ₹740.00 crores.

KFC Performance

KFC, the company's flagship brand, saw a 7% revenue growth. However, excluding the impact of Navratri, which shifted from Q3 last year to Q2 this year, KFC would have achieved double-digit growth. The brand maintained flat same-store sales growth (SSSG) excluding the Navratri impact, with positive transaction growth.

Pizza Hut Challenges and Tamil Nadu Success

Pizza Hut faced headwinds with a 6% overall revenue decline. However, the brand showed promising results in Tamil Nadu, Sapphire's exclusive territory, where it achieved double-digit growth. This success in Tamil Nadu provides a potential model for reviving the Pizza Hut brand across India.

Sri Lanka Operations

Sri Lanka operations demonstrated strong performance, growing 18% in local currency terms. The country's business has shown resilience and recovery following economic challenges two years ago.

Store Expansion

Sapphire Foods added 19 KFC restaurants and 2 Pizza Hut outlets in India during the quarter. The company reached a significant milestone by inaugurating its 1000th restaurant, a KFC outlet in Gummidipoondi, Tamil Nadu.

Financial Highlights

All financial figures in crores of Indian Rupees

Strategic Initiatives

Sapphire Foods is focusing on driving penetration and frequency for the KFC brand. The company launched the 'Taste the Epic' campaign to popularize core buckets, offering 9 pieces for ₹299.00. For Pizza Hut, the company introduced innovations such as the Ultimate Cheese Pizza and Cheesy Pocket to satisfy customer demand for additional cheese.

Outlook

While facing challenges in the current market environment, Sapphire Foods remains committed to its growth strategy. The company is optimistic about the potential for recovery, particularly given recent government initiatives such as GST reduction and income tax cuts, which may boost consumer spending.

Sanjay Purohit, Whole-time Director & Group CEO, commented, "We think it was a reasonable quarter. KFC growing at double-digit excluding Navratri. There is a clear way forward for the Pizza Hut brand basis our experience in Tamil Nadu and Sri Lanka."

The company acknowledges that reviving the Pizza Hut brand may require persistent efforts over the next 2-3 years, even in the successful Tamil Nadu market. Sapphire Foods plans to continue investing in marketing and innovation to drive growth across its brands.

As the company navigates through a challenging consumer environment, it remains focused on operational excellence and strategic expansion to capitalize on long-term growth opportunities in the Indian QSR market.