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Grasim gets tax demand of Rs8,334 cr

The tax issue first arose in 2019 when the Deputy Commissioner of Income Tax (DCIT) had issued a show cause notice to Grasim over application of dividend distribution tax on shares received by Grasim from Aditya Birla Capital Ltd Premium
The tax issue first arose in 2019 when the Deputy Commissioner of Income Tax (DCIT) had issued a show cause notice to Grasim over application of dividend distribution tax on shares received by Grasim from Aditya Birla Capital Ltd 

  • In March 2019, the DCIT raised a demand of Rs5,872.13 crore on account of Dividend Distribution Tax, stating that the value of shares allotted by ABCL to the shareholders of Grasim amounted to dividend.

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Mumbai: Aditya Birla group company Grasim Ltd on Friday informed the stock exchanges that income tax authorities have raised a demand of Rs8,334 crore for the assessment year (AY) 2018-19 on the company in regards to sale of shares of a group company.

The company said that it would take appropriate action against the order which it believes is against the spirit of tax laws.

The tax issue first arose in 2019 when the Deputy Commissioner of Income Tax (DCIT) had issued a show cause notice to Grasim over application of dividend distribution tax on shares received by Grasim from Aditya Birla Capital Ltd (ABCL), as part of a restructuring exercise undertaken by the group involving the merger of Aditya Birla Nuvo Ltd with Grasim Industries Ltd and subsequent demerger of the group’s financial services business Aditya Birla Financial Services Limited (now known as ABCL) into a separate entity.

In March 2019, the DCIT raised a demand of Rs5,872.13 crore on account of Dividend Distribution Tax, stating that the value of shares allotted by ABCL to the shareholders of Grasim amounted to dividend.

“As a corollary to the earlier order, the Learned DCIT has likewise imposed capital gain tax on the value of shares, without considering that the shares were issued to the shareholders pursuant to the scheme of arrangement and no consideration was received by the Company, which could be subjected to tax," Grasim said on Friday.

‘The Learned DCIT has valued the shares issued by the Resulting Company (Aditya Birla Capital Ltd) at Rs24,037 crore as the sale consideration for transfer of undertaking and has made addition of capital gains of Rs22,772 crore to the income of the Company as part of scrutiny assessment for the AY 2018-19 and has passed draft assessment order on 30th September 2021," said Grasim.

Based on the draft order, demand for the AY 2018-19 is estimated at Rs8,334 crore, including interest and excluding any penalty proceedings.

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