Grasim Industries said on Saturday that the Income Tax Department has called for Rs 5,872.13 crore to be paid as taxes with respect to its merger with Aditya Birla Nuvo and Aditya Birla Financial Services, but will challenge the order.

On Friday, the company received a communication 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), the company informed stock exchanges in regulatory filings.

The department held that as the demerger of the demerged undertaking is not in compliance with Section 2(19 AA) of the Act, the value of shares allotted by Aditya Birla Capital Ltd to the shareholders 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.

Grasim said it is of view that the aforesaid order is not tenable in law. "The necessary action(s) against the order is being taken by the company," it added.

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.

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