In a recent regulatory disclosure, Polycab India Limited informed stock exchanges that it has received an income tax assessment order raising a demand of approximately ₹327.45 crore for the Assessment Year (AY) 2024-25 (corresponding to FY 2023-24).
The order has been passed by the jurisdictional assessing authority under scrutiny assessment proceedings.
Background of the Dispute
According to the company, the assessment order includes additions and disallowances amounting to around ₹41.87 crore. However, the final tax demand reflected in the order is significantly higher—₹327 crore—indicating what the company believes to be computational and apparent errors in the tax calculation.
Such discrepancies may arise due to:
- Incorrect tax computation,
- Errors in set-off of losses or credits,
- Miscalculation of surcharge or interest,
- Non-granting of prepaid taxes such as TDS or advance tax.
Company’s Proposed Course of Action
Polycab has clarified that it intends to pursue a two-step legal remedy:
1️⃣ Filing a Rectification Application
The company plans to move a rectification application before the assessing officer to correct apparent mistakes in the computation of tax demand. Rectification is generally sought when errors are clerical, arithmetical, or evident on the face of the record.
If the demand inflation is due to computational inaccuracies, this step may substantially reduce the disputed amount.
2️⃣ Filing an Appeal Against Additions
In addition to rectification, Polycab will file a formal appeal challenging the substantive additions and disallowances made in the assessment order. The appeal is expected to be filed before the appropriate appellate authority and may eventually travel to the Income Tax Appellate Tribunal if required.
Financial and Legal Implications
The company has stated that it does not anticipate any material adverse impact on its financial position. This suggests that:
- The disputed issues are contestable in law,
- Adequate tax positions may have been taken based on professional advice,
- Necessary disclosures have been made in financial statements.
It is common for large corporates to contest assessment orders where interpretational differences or computational inconsistencies arise.
What Happens Next?
The immediate focus will be on:
- Disposal of the rectification application,
- Filing of appeal within prescribed timelines,
- Possible stay application to prevent coercive recovery.
The matter will now proceed through the statutory appellate framework unless resolved at the rectification stage.
Conclusion
Tax litigation at the corporate level often involves interpretational issues and computational disputes rather than deliberate non-compliance. Polycab’s structured response—seeking rectification alongside appellate remedy—reflects a standard legal approach adopted by corporates when faced with high-value tax demands.
The progress of this case will be closely watched from both a taxation and investor perspective.