Grasim Industries Monday said it has challenged the Rs 5,872.13 crore income-tax demand with respect to its merger with two Aditya Birla group firms before the Bombay High Court, which has granted stay against the recovery.

"The Company has today received order dated March 22, 2019 from the Bombay High Court. The Bombay High Court, while granting time to the Department for filing reply, has granted stay against the recovery of demand," it said.

Grasim Industries had on March 16 said it has received Rs 5,872.13 crore tax demand from the department over its merger with Aditya Birla Nuvo and Aditya Birla Financial Services.

"The company has challenged order of Deputy Commissioner of Income Tax (DCIT) dated March 14 2019, raising demand of sum of Rs 5,872.13 crore on account of Dividend Distribution Tax (including interest) before the Bombay High Court," it said.

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).

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