HC stays I-T action against CTS, asks it to pay 15 percent of DDT dues

The company has filed a plea in the court seeking stay of recovery proceedings as the I-T department had frozen some of its bank accounts. 

The US-based IT firm has said it paid all applicable taxes related to its buy-back transaction in 2016 and the Income Tax department’s position is “contrary to law and without merit.” The tech giant’s comments follow the department freezing its certain bank accounts in the country over a dispute on payment of dividend distribution tax (DDT) running into hundreds of crore. 

Karen McLoughlin, Chief Financial Officer, Cognizant said, “Our operations remain unaffected. This dispute is with respect to a lawful, fully reviewed and disclosed transaction, and we are pleased with today’s decision that restores appropriate due process.  Cognizant is committed to complying with the law in all jurisdictions in which we operate, and we will continue our defense against the assertions of the Indian Income Tax Department in this and other tax disputes.”  

The tax issue pertains to unpaid dues around share purchases by its subsidiary, Cognizant Technology Solutions India, which had bought back shares from foreign owners — Cognizant Mauritius and the parent firm Cognizant Technology Solutions (CTS). 

Justice TS Sivagnanam, before whom the plea came up, said, “There shall be an order of interim stay of impugned proceedings subject to the condition that the petitioner pays 15 per cent of the tax demanded and furnishes a bank guarantee or security by way of fixed deposit for the remaining taxes demanded.” 

“For the proper compliance to the above condition, the attachment of (company) bank account with JP Morgan Chase Bank, Mumbai shall stand lifted forthwith,” the judge said.