Dr. Reddy's slapped with ₹2,400cr tax notice by I-T authority
What's the story
Dr. Reddy's Laboratories has received a show-cause notice from the income tax authorities. Issued by the Assistant Commissioner of Income Tax in Hyderabad on April 4, the notice asks why an assessment notice shouldn't be issued for alleged income that escaped taxation due to the merger of Dr Reddy's Holding Ltd (DRHL) into itself. The proposed demand is worth ₹2,395 crore.
Approval details
Merger approved by National Company Law Tribunal
The merger in question was approved by the Hyderabad bench of the National Company Law Tribunal (NCLT) on April 5, 2022. The tribunal approved the scheme of amalgamation with effect from April 1, 2019. Dr Reddy's Laboratories has clarified that it complied with all legal requirements in this regard, including tax laws. The company strongly believes that there has been no tax evasion after this merger scheme.
Response plan
Company to respond to tax notice
Dr Reddy's Laboratories is reviewing the information and clarifications sought in the show-cause notice. The company intends to respond appropriately, as required. Further, it has said that under the scheme of amalgamation, its promoters will indemnify and defend the company against any liability or claim arising out of this merger. This indemnification also covers its directors, employees, officers, representatives, or any other authorized person (other than promoters).