Dalmia Bharat, Subsidiaries Move SC Against Madras HC Tax Reassessment Order

Dalmia Bharat Ltd. and its two subsidiaries, Dalmia Cement (Bharat) Ltd. and Dalmia Power Ltd., have approached the Supreme Court challenging the Madras High Court’s order upholding the income tax department’s reassessment proceedings against them. The companies said they have a strong case on merits in an exchange filing.

The case stems from KKR Mauritius Cement Investment Ltd.’s ₹5 billion investment in Dalmia Cement (Bharat). KKR Mauritius was allotted 37.92 million equity shares, representing 14.99% of the company’s stake. The shares were bought back by Dalmia Bharat in 2016 for ₹12.18 billion.

The income tax assessing officer considered this a case of round-tripping and proposed reopening the tax assessments of all three companies. The companies challenged the reassessment before a single judge bench of the high court, which ruled in their favour, stating that since Dalmia Cement (Bharat) had disclosed the KKR investment in its returns, the assessments could not be reopened.

The income tax department then appealed to the division bench, which found prima facie evidence that KKR Mauritius Cement Investment was a shell company. “The scale of returns and the manner in which the transactions had been conducted also prima facie suggest round-tripping,” the division bench said.

The three Dalmia companies have now moved the Supreme Court against the division bench order. “We are of the view that the findings of the Honorable Division Bench of the High Court are unsustainable,” Dalmia Bharat said in its filing.