Aditya Birla Group firm Grasim Industries said it received Rs 5,872.13 crore tax demand from the income tax department with respect to its merger with Aditya Birla Nuvo and Aditya Birla Financial Services Ltd.

“The company has, on March 15, received an order dated March 14, 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),” Grasim Industries said in a regulatory filing.

The Deputy Commissioner of Income Tax 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 Ltd. to the shareholders of Grasim Industries, in consideration of the transfer and vesting of the demerged undertaking into Aditya Birla Capital, amounted to dividend, within the meaning of the Act, the filing said.

“The necessary action(s) against the order is being taken by the company,” Grasim Industries said.

The company said, the Deputy Commissioner of Income Tax had issued a show cause notice on Feb. 11, 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.

Following which, the company said it had filed its detailed submissions in response to these notices.

In September 2017, the National Company Law Tribunal bench at Ahmedabad had approved the merger of Aditya Birla Nuvo with Grasim Industries to be followed by the listing of Aditya Birla Financial Services.