Rs 2500 cr tax issue: Massive setback for tech firm Cognizant as Income Tax dept freezes its Mumbai, Chennai accounts

By: | Published: March 28, 2018 4:18 AM

Cognizant, which is listed on Nasdaq, has more than 70% of its employees present in India with holding companies registered in Mauritius and headquarters in the US.

cognizant, IT dept, cognizant mumbai account, cognizant chennai accountThe Income Tax department has frozen the bank accounts of technology firm Cognizant in Mumbai and Chennai over a dispute on the payment of dividend distribution tax (DDT) in excess of Rs 2,500 crore. (PTI)

The Income Tax department has frozen the bank accounts of technology firm Cognizant in Mumbai and Chennai over a dispute on the payment of dividend distribution tax (DDT) in excess of Rs 2,500 crore. The I-T department has raised this claim following Cognizant’s share buyback offer in 2016. A notice by the tax authorities stated: “CTS had paid only the face value of Rs 10 from the share capital and entire balance was paid from the accumulated profits which was dividend on which DDT of more than Rs 2,500 crore was not paid.” The I-T department has also charged that the company had distributed dividends to its parent company in 2016-17 and should have been subjected to DDT at 20% of the total dividends paid by the company.

In response, the company said in a statement: “Cognizant’s business operations, our associates and our work with clients are not impacted by actions recently attempted by the Income Tax Department. The High Court of Chennai this morning heard the matter and instructed the Income Tax Department to not take further action pending further hearings before the court.” It added: “The company believes that the positions taken by the Indian Income Tax Department are contrary to law and without merit. Cognizant has paid all applicable taxes due on the transaction at issue. The firm will continue to vigorously defend itself and will pursue all available legal remedies. Cognizant is committed to complying with the law in all jurisdictions where it operates.”

Cognizant, which is listed on Nasdaq, has more than 70% of its employees present in India with holding companies registered in Mauritius and headquarters in the US. The I-T department said, “CTS did not deduct tax on the remittances to Mauritius company and deducted 10% TDS on the remittance to USA company.” Cognizant had, in December 2017, had announced a $300 million accelerated share repurchase programme as part of its plan to buyback $1.2 billion of share in 2018. The company had earlier returned approximately $1.8 billion under its capital return plan. Cognizant has committed to return $3.4 billion to shareholders through buyback and dividend.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition