Dr Reddy's Gets Rs 2,395 Crore Tax Notice Over Merger, Says No Material Impact
New Delhi: Drug major, Dr. Reddy's Laboratories Ltd. has disclosed that it has received an order from the Income Tax Department under Section 148A(3) of the Income Tax Act, 1961, initiating reassessment proceedings for the Assessment Year 2020-21. The move comes in connection with the company's merger with Dr. Reddy's Holdings Limited (DRHL), approved in 2022.
According to the company’s regulatory filing dated May 31, 2025, “The Income Tax Authority has deemed it appropriate to issue a notice under Section 148 to assess or reassess the income for the Assessment Year 2020-21.”
The reassessment stems from an earlier show cause notice received by the company on April 4, 2025, under Section 148A(1) of the Act. The notice sought an explanation on why income alleged to have escaped assessment should not be reassessed, following the merger of DRHL into Dr. Reddy’s Laboratories under a scheme approved by the National Company Law Tribunal (NCLT), Hyderabad.
The company emphasized that the amalgamation was conducted in full compliance with applicable tax laws. “The said scheme of amalgamation was carried with adherence to all the legal requirements including tax laws. Further, this was approved by the Honorable National Company Law Tribunal (NCLT), Hyderabad on 5th April 2022 with effect from the Appointed date i.e. 01st April 2019,” it stated.
The tax authority has proposed a demand of Rs 2,395.81 crore as per the original April notice. However, Dr. Reddy’s maintained that this will not materially impact its financials at present. “Based on our assessment, there is no material impact on the financials, operations, or other activities of the Company at this stage,” the company clarified.
Dr. Reddy’s also pointed out that under the terms of the merger scheme, “the Promoters of the Company will jointly and severally indemnify, defend and hold harmless the Company… for any liability, claim, or demand, which may devolve upon the Company on account of this amalgamation.”
The company added it is currently reviewing the order and will take appropriate actions as necessary.
This development follows an earlier disclosure made on April 5, 2025, regarding the receipt of the initial notice. The latest update complies with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
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