Dr Reddy's gets Rs 2,395 crore tax notice over merger with holding company

New Delhi, April 6 (IANS) Dr Reddy’s Laboratories Limited has received a showcause notice from the Income Tax Department, proposing a demand of over Rs 2,395 crore.

The notice is related to the merger of Dr Reddy’s Holdings Limited (DRHL) with the company.

In a regulatory filing on Saturday, Dr Reddy’s said it received the notice on April 4, 2025, from the office of the Assistant Commissioner of Income Tax in Hyderabad.

The notice questions why an assessment should not be made for income that is said to have escaped tax during the merger.

The merger of DRHL into Dr Reddy’s Laboratories was approved by the National Company Law Tribunal (NCLT), Hyderabad, on April 5, 2022.

However, the merger was effective from April 1, 2019, as per the approved scheme. According to the filing, the tax department has proposed a demand of Rs 2,395.81 crore.

"The notice quantifies the proposed demand of Rs 23,95,81,79,470," the company said in its filing.

Responding to the notice, Dr Reddy’s said the merger followed all legal and tax-related procedures. The company said it firmly believes that no income has escaped taxation due to the merger.

“The merger was done in full compliance with legal requirements, including those under the Income Tax Act,” the company stated.

It added that it is currently reviewing the details and will respond to the authorities with the necessary information.

"Nonetheless, the company is reviewing the information and clarifications required in the showcause notice and will respond, as required, appropriately," the company stated.

Dr Reddy’s also said that, as per the merger agreement, the company’s promoters are responsible for covering any liabilities arising from the merger.

They are required to protect and support the company and its officials in case any tax-related issues arise due to the amalgamation.

The company assured that it is taking the matter seriously and will handle it in accordance with legal procedures.

--IANS

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