The Supreme Court of India has dismissed Patanjali Foods Ltd's tax demand of Rs 186 crore. The Supreme Court quashed the demand in response to a Special Leave Petition (SLP) filed by the Principal Commissioner of Income Tax, Central 4, challenging a Bombay High Court ruling.

Patanjali Foods announced the development in a regulatory filing on February 19, stating, "The Income Tax Department's demands of Rs 186 crore for the pre-Corporate Insolvency Resolution Process (CIRP) period have been quashed by the Hon'ble Supreme Court of India."

The Supreme Court dismissed the SLP on January 15, 2025, upholding the Bombay High Court's decision. Patanjali Foods, on the other hand, claimed that it only learned about the ruling on February 18, 2025, after discovering it on the tax and finance website Taxmann.

Background of the Case

Prior to the Corporate Insolvency Resolution Process (CIRP) at Patanjali Foods, the tax demand covered several assessment years. The Income Tax Department filed a writ petition with the Bombay High Court after the National Company Law Tribunal (NCLT) initially rejected the tax claims. The tax authorities appealed to the Supreme Court after the High Court's decision in favor of Patanjali Foods, but the court ultimately rejected the petition.

Patanjali Foods' exchange filing included a copy of the Supreme Court order, which stated, "The Special Leave Petition is, accordingly, dismissed." 

Patanjali Foods' shares rise

Since the announcement, shares of Patanjali Foods have increased marginally on Thursday. The company's shares were up 0.83 percent, at Rs 1,842.05 per share.

In the meantime, the business reported a 71% increase in net profits, indicating a strong third-quarter performance. Strong demand in its cooking oil segment, which continues to see high consumption despite inflationary pressures, was the main driver of this expansion. However, because of decreased demand, the food and fast-moving consumer goods (FMCG) division's revenue dropped 18%.

The mid-September increase in import taxes on crude and refined edible oils caused input costs to rise, resulting in a 13% increase in the company's overall expenses.

With the Supreme Court's decision providing regulatory clarity, Patanjali Foods is expected to focus on consolidating its market presence in the face of fluctuating consumer demand and rising operational costs.