Dr Reddy’s Laboratories Limited, a pharmaceutical company, has received a showcause notice from the Income Tax Department, demanding a massive amount of over Rs 2,395 crore. The notice is related to the merger of Dr Reddy’s Holdings Limited (DRHL) with the company in 2019. The tax department has proposed that the company had failed to declare income that had escaped taxation during the merger. The company has responded to the notice, stating that the merger was done in full compliance with legal requirements, including those under the Income Tax Act. Dr Reddy’s believes that no income has escaped taxation due to the merger and is reviewing the details to respond to the authorities.
The company has assured that it is taking the matter seriously and will handle it in accordance with legal procedures. Dr Reddy’s has also stated that its promoters are responsible for covering any liabilities arising from the merger and will protect and support the company and its officials in case any tax-related issues arise. The company will respond to the authorities with the necessary information and will take all necessary steps to resolve the matter. The exact reasons for the proposed demand of Rs 2,395.81 crore have not been disclosed.
The National Company Law Tribunal (NCLT) had approved the merger of DRHL with Dr Reddy’s Laboratories in 2022. However, the merger was effective from April 1, 2019, as per the approved scheme. Dr Reddy’s had demerged its domestic formulations business into DRHL in 2019. The company is currently reviewing the details of the notice and will take necessary steps to resolve the matter.