The Indian sugar company Ponni Sugars (Erode) Limited has received an order from the tax authority regarding Transfer Pricing, related to internal transactions between its sugar unit and its power cogeneration unit.
Order issued by the tax authority
According to information disclosed by the company, on March 27, 2026, the Income Tax Department of India, through the Commissioner of Income Tax (Transfer Pricing) in Chennai, issued a resolution under Section 263 of the Income Tax Act of 1961.
The order mandates a review of the arm’s length price (ALP) applicable to the internal transfer of bagasse from the sugar unit to the company’s power cogeneration unit for the 2021-22 fiscal year.
Revision of the TPO’s Previous Decision
According to the resolution, the tax authority partially revoked the previous determination issued by the Transfer Pricing Officer (TPO) on October 26, 2023, but only with respect to the treatment of the transfer of bagasse between the business units.
Consequently, the TPO has been instructed to issue a new determination, applying the relevant regulations and granting the taxpayer the opportunity to present its arguments during the process.
Company’s Position
The company has expressed its disagreement with the methodology used by the tax authority to determine the transfer price of said transaction, noting that, in its opinion, it is not legally sustainable.
It also indicated that it will evaluate the appropriate legal actions to challenge the resolution.
Potential financial implications
The company noted that the adjustments resulting from this review could have significant financial implications, including potential effects on several fiscal years related to transactions between the sugar and cogeneration units.
However, it specified that it is not yet possible to accurately quantify the economic impact of the decision.
Recent Background
This resolution follows another announcement made by the company in January 2026, in which it reported having received an order from the TPO under Section 92CA(3) of the Income Tax Act, regarding proposed adjustments to the cost of fuel and the selling price of energy in transactions between its sugar and cogeneration segments.
Regulatory Disclosure
The company disclosed this information to the market in compliance with Regulation 30 of the Indian stock market disclosure rules, formally notifying the relevant stock exchanges.
In this context, TPC Group, a specialized firm with an international presence, advises companies on the analysis and documentation of their transfer pricing policies, as well as on tax risk management and audit processes, supporting organizations in complying with the arm’s length principle and anticipating potential adjustments by tax authorities in various jurisdictions.
Source: ScanX