Grasim Industries on Monday said it has challenged the ₹5,872.13 crore income-tax demand with regard to its merger with two Aditya Birla group firms before the Bombay High Court, which has granted stay against the recovery.
The company has stood before the High Court that order was wholly unsustainable in law and the Income Tax department has asked for time to file reply, Grasim Industries said in a BSE filing.
It said that he Company has today received order dated March 22, 2019 from the Bombay High Court. The Bombay High Court granted time to the Department for filing reply and allowed a stay against the recovery of demand.
Grasim Industries had on March 16 said it has received₹5,872.13 crore tax demand from the department over its merger with Aditya Birla Nuvo and Aditya Birla Financial Services.
It said that the company has challenged order of Deputy Commissioner of Income Tax (DCIT) dated March 14 2019, raising demand of sum of ₹5,872.13 crore on account of Dividend Distribution Tax (including interest) before the Bombay High Court.
DCIT held that as the demerger of the demerged undertaking is not in compliance with Section 2(19 AA) of the Income Tax Act, the value of shares allotted by Aditya Birla Capital (ABCL) to the shareholders of Grasim Industries, in consideration of the transfer and vesting of the Demerged Undertaking into ABCL, amounted to dividend, within the meaning of the Act, the filing had added.
In September 2017, the National Company Law Tribunal (NCLT) bench at Ahmedabad had approved the merger of Aditya Birla Nuvo (ABNL) with Grasim Industries to be followed by the listing of Aditya Birla Financial Services Ltd (ABFSL).
On March 14 this year, the company received a communication issued by the Deputy Commissioner of Income Tax, raising a demand of Rs 5,872.13 crore on account of dividend distribution tax (including interest).
The company said that Deputy Commissioner of Income Tax had issued a show cause notice on February 11, which was subsequently revised on March 1, as to why the provisions of section 115-0 read with section 115-Q of the Income Tax Act, 1961 should not be applied on the allotment of equity shares by Aditya Birla Capital to the shareholders Grasim Industries, pursuant to the mega merger between the three entities.
The company said it had filed its detailed submissions in response to these notices.
