Dr Reddy’s Laboratories Faces Rs 2,395 Crore Tax Demand Following Merger
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Synopsis
On April 6, Dr Reddy's Laboratories Limited received a showcause notice from the Income Tax Department concerning a tax demand exceeding Rs 2,395 crore related to its merger with Dr Reddy's Holdings Limited. The company insists it has complied with all legal requirements during the merger process and is reviewing the notice.
Key Takeaways
- Dr Reddy's Laboratories received a Rs 2,395 crore tax notice.
- The notice pertains to the merger with Dr Reddy's Holdings Limited.
- The merger was approved by the NCLT on April 5, 2022.
- Dr Reddy’s asserts compliance with all tax protocols.
- The company is reviewing the notice and will respond appropriately.
New Delhi, April 6 (NationPress) Dr Reddy’s Laboratories Limited has received a showcause notice from the Income Tax Department, proposing a demand of over Rs 2,395 crore.
This notice pertains to the merger of Dr Reddy’s Holdings Limited (DRHL) with the company.
In a regulatory filing on Saturday, Dr Reddy’s disclosed that it received the notice on April 4, 2025, from the Assistant Commissioner of Income Tax in Hyderabad.
The notice raises concerns regarding why an assessment should not be conducted for income believed to have escaped taxation during the merger.
The merger of DRHL into Dr Reddy’s Laboratories was sanctioned by the National Company Law Tribunal (NCLT), Hyderabad, on April 5, 2022.
However, the merger took effect from April 1, 2019, according to the approved scheme. The tax department has put forth a demand totaling Rs 2,395.81 crore.
"The notice quantifies the proposed demand of Rs 23,95,81,79,470," the company stated in its filing.
In response to the notice, Dr Reddy’s asserted that the merger adhered to all legal and tax-related protocols. The company is confident that no income has eluded taxation due to the merger.
“The merger was executed in full compliance with legal standards, including those outlined in the Income Tax Act," the company emphasized.
It further mentioned that it is currently reviewing the details and will respond to the authorities with the necessary documentation.
"Nevertheless, the company is evaluating the information and clarifications requested in the showcause notice and will respond appropriately," Dr Reddy’s noted.
Dr Reddy’s also indicated that, according to the merger agreement, the company’s promoters are liable for any obligations that arise following the merger.
They are required to safeguard and support the company and its officials in the event of any tax-related complications stemming from the amalgamation.
The company assured that it is treating the matter with utmost seriousness and will manage it according to legal protocols.
