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Pharmaceutical major Dr. Reddy’s Laboratories Limited (DRL) is facing a potential tax demand of over ₹2,395 crore from the Income Tax Authority. The demand, stems from the assessment year 2020-21, is linked to the merger of Dr. Reddy’s Holding Limited (DRHL) into Dr. Reddy’s Laboratories Limited (DRL) under a scheme of amalgamation.
The company disclosed receiving a show cause notice on April 4, 2025, from the I-T Department. This notice required Dr. Reddy’s to demonstrate why its tax returns for the Assessment Year 2020-21 should not be reassessed.
Following the company’s response to this initial notice, the Income Tax Authority issued an Order on May 30, 2025, justifying the demand notice.
Dr. Reddy’s has stated that the scheme of amalgamation, which was approved by the National Company Law Tribunal (NCLT) in Hyderabad on April 5, 2022, with an effective date of April 1, 2019, was carried out in adherence to all legal requirements, including tax laws.
The company said it strongly believed that there had been no escapement of tax as a result of this merger scheme.
Despite the significant proposed demand, the company’s current assessment is that there is “no material impact on the financials, operations, or other activities of the Company at this stage”. The company said it is currently reviewing the recent order and notice and plans to take the necessary actions as required.
“Based on our assessment, there is no material impact on the financials, operations, or other activities of the company at this stage,” it said.
Published on May 31, 2025
This article first appeared on The Hindu Business Line
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