A similar issue with inline constant support regarding array access ( #149) was fixed some years ago. In your case you can hack around this issue similarly by editing the file sysplugins/smarty_internal_templateparser.php. In function yy_r13() (line 2257) change

if (defined($tag)) {

to

if (0) {

Then the tagnames don't get replaced by defined values.
This does the trick only for tagnames and is a hack only, of course. It should be changed in the template lexer, from which the file is generated. Cleanest solution would be to introduce a variable like $Smarty->useInlineConstants and adjust the lexer accordingly. So one could turn off inline constant support alltogether ($smarty.const.foo syntax would still work).

Thanks for your reply.

Indeed this should be controlled via a setting specially that we're using smarty with composer so it doesn't make sense to hack a specific file in the smarty lib. Would appreciate adding this fix to the upcoming release.

I also noticed a different parser behaviour for constants with PHP 7.3 early this year, see #534 .
But I would think your usage of defining PHP variables via CONSTANT define() instead of VARIABLE assign() is just wrong, as far as I got you right. And taking the keyword assign as "constant" is bad too since that is build/prone to produce errors/false behaviours. You should keep things clear out of way, so that PHP evolution changes (like for constants) don't do that bad.

anyone can break smarty by defining a php variable having the same smarty tag name

That's simply untrue. Please don't spread misinformation. Not to mention, this has nothing to do with PHP variables.