In a series of developments in the pharmaceutical sector, Dr Reddys Laboratories has obtained a legal reprieve, while Cipla faces a product recall in the United States, and Biocon receives a regulatory nod for a diabetes medication.

Dr Reddy's Obtains Interim Stay on Tax Reassessment

Dr Reddy's Laboratories has secured an interim stay from the Telangana High Court on income tax reassessment proceedings. The proceedings were related to the company's merger with Dr. Reddy's Holding Ltd. Prior to this stay, the pharmaceutical giant had received a show cause notice proposing a substantial demand of over ₹2,395.00 crore in connection with the merger.

Cipla Recalls Asthma Medication in the US

In a separate development, Cipla is initiating a recall of more than 20,000 packs of Ibuterol Sulfate Inhalation Aerosol in the United States. This medication, used in the treatment of asthma and chronic obstructive pulmonary disease (COPD), is being recalled according to the U.S. Food and Drug Administration's (USFDA) Enforcement Report. The specific reasons for the recall have not been disclosed in the provided information.

Biocon Receives FDA Approval for Diabetes Medication

On a positive note, Biocon Pharma Ltd has received tentative approval from the USFDA for its Sitagliptin Tablets USP. The approval covers three strengths: 25 mg, 50 mg, and 100 mg. Sitagliptin is indicated for improving glycemic control in adults with type 2 diabetes mellitus. This approval marks a significant step for Biocon in expanding its presence in the diabetes medication market in the United States.

These developments highlight the dynamic nature of the pharmaceutical industry, with companies navigating regulatory challenges, product safety measures, and new drug approvals. The outcomes of these events could have implications for the respective companies' market positions and financial performance in the coming quarters.

Dr Reddys Laboratories , a prominent pharmaceutical company, has obtained an interim stay from the Telangana High Court regarding income tax reassessment proceedings connected to its merger with Dr. Reddy's Holding Limited (DRHL). The court order temporarily halts the tax reassessment process that was being conducted in relation to this corporate transaction.

Background of the Case

According to the company's disclosure under SEBI regulations, Dr. Reddy's had received a show cause notice from the Office of the Assistant Commissioner of Income Tax, circle 8(1), Hyderabad. The notice, issued under section 148A of the Income-tax Act, 1961, required the company to explain why a notice under section 148 should not be issued for the assessment of income allegedly escaping tax due to the merger of DRHL into Dr. Reddy's Laboratories Limited (DRL).

Reassessment Notice and Company's Response

The Income Tax Authority issued an order under Section 148A(3) of the Act, deeming it appropriate to issue a notice under Section 148 to assess or reassess the income. In response, Dr. Reddy's filed a writ petition before the Telangana High Court, seeking to quash the impugned order and the reassessment proceedings on various grounds.

Interim Stay Granted

The Telangana High Court, after hearing the matter, granted an interim stay. This stay applies to both the impugned order under Section 148A(3) and the reassessment notice under Section 148 of the Act. The stay will remain in effect until the next date of hearing.

Company's Stance and Future Actions

Dr. Reddy's Laboratories has stated that it "strongly believes that there is no escapement of tax pursuant to the said merger scheme." The company is closely monitoring the situation and has indicated that it will take appropriate actions as required.

Indemnification Clause

Importantly, the merger scheme includes a provision for indemnification. According to this clause, the Promoters of Dr. Reddy's will jointly and severally indemnify, defend, and hold harmless the company, its directors, employees, officers, representatives, or any other authorized persons (excluding the Promoters) for any liability, claim, or demand that may arise due to this amalgamation.

Optimism on GST Reforms

In a separate development, Dr. Reddy's Laboratories has expressed optimism regarding upcoming GST reforms. The company believes these reforms could address structural challenges facing the pharmaceutical sector, including higher GST rates and inverted duty structure that impact domestic manufacturing costs and medicine affordability.

Chairman Satish Reddy stated that the reforms could introduce a rationalized, industry-friendly tax framework. This new framework is expected to improve medicine accessibility and enhance India's global pharmaceutical competitiveness.

Industry Perspective on GST

The Association of Indian Medical Device Industry has also weighed in on the GST issue. They advocate for retaining 12% GST on most consumables while supporting 5% rates on high-value equipment. The association noted that current GST structures create margin pressures, with devices taxed at 12% while inputs face 18% rates.

As these legal and regulatory matters unfold, stakeholders will be watching closely to see how they impact Dr. Reddy's Laboratories and potentially set precedents for the pharmaceutical sector in India.