Dr Reddy’s Receives ₹2,395-Crore Show Cause Notice from Income Tax Department

Dr Reddy’s Laboratories Ltd has received a show cause notice from the Income Tax Department, proposing a tax demand of over ₹2,395 crore. The notice, dated April 4, 2025, is linked to the merger of Dr Reddy’s Holdings Ltd (DRHL) with the pharmaceutical major.

In a regulatory filing on Saturday, the Hyderabad-based company said the notice was issued by the Assistant Commissioner of Income Tax. It pertains to alleged income that escaped taxation following the amalgamation of DRHL into Dr Reddy’s Laboratories Ltd (DRL), under a scheme approved by the National Company Law Tribunal (NCLT), Hyderabad, on April 5, 2022.

The notice requires Dr Reddy’s to explain why proceedings should not be initiated under Section 148A(b) of the Income Tax Act for the assessment of income allegedly left untaxed due to the merger.

The company has yet to respond to the notice and is currently reviewing the details. “We will take appropriate legal and factual steps in response to the notice,” Dr Reddy’s stated.

This development could have significant implications for the company’s financial and legal position. Industry analysts are closely watching how the situation unfolds, as it may also set a precedent for other corporate amalgamations in India.