Intimation of receipt of notice of demand under Income Tax Act, 1961
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Awaiting price reaction for this filing.
Stovec Industries has received a notice of demand from the Income Tax Department for Assessment Year 2020-21 amounting to Rs. 4,02,42,222 (approximately Rs. 4.02 crore). The demand pertains to alleged non-deduction of TDS under Section 195 of the Income Tax Act on remittances made for the 'Acquisition of Service and Spares parts Business.' The company will need to make a mandatory pre-deposit of 20% of the demand amount (~Rs. 80.5 lakh) to file an appeal before the Appellate Authority under Section 246A. Stovec plans to contest the demand within the stipulated time. The amount will also need to be disclosed as a contingent liability until the appeal is resolved. No penalty or restriction has been imposed at this stage.
Short-term cash outflow of ~Rs. 80.5 lakh (20% pre-deposit) for filing the appeal, with the full Rs. 4.02 crore sitting as contingent liability. If the appeal is unsuccessful, the company would need to pay the remaining amount, which could pressure earnings. However, since the company intends to contest and no adverse ruling has been made yet, the impact on the stock is likely to be limited unless the dispute escalates.