Dr Reddy's Faces Income Tax Show Cause Notice

Dr Reddy's Laboratories Ltd has received a show cause notice from the income tax authority concerning a proposed tax demand of over Rs 2,395 crore related to its merger with Dr Reddy's Holding Ltd. The company argues the merger adhered to legal requirements and plans to respond appropriately.

Dr Reddy's Laboratories Ltd announced on Saturday that it has been issued a show cause notice by the income tax authority with a proposed demand exceeding Rs 2,395 crore. The notice is linked to the merger between Dr Reddy's Holding Ltd and Dr Reddy's Laboratories Ltd, as disclosed in a regulatory filing.

According to the filing, the notice requires Dr Reddy's to explain why an assessment of income, alleged to have escaped taxation following the merger, should not proceed. This merger was approved by the National Company Law Tribunal (NCLT) in Hyderabad on April 5, 2022, with an appointed date of April 1, 2019.

The company has asserted its compliance with all legal and tax requirements concerning the amalgamation. It maintains that there is no tax avoidance as suggested by the notice, and is in the process of reviewing the necessary information to respond effectively.

(With inputs from agencies.)