Chennai: Cognizant Technologies told to remit 15 per cent of Income Tax dues in two days

CHENNAI: The Madras High Court has directed Cognizant Technologies to remit 15 per cent of the total tax of Rs 2,800 crore, which is allegedly due to the Income Tax department, within two days.
Justice T S Sivagnanam, who granted the interim relief to Cognizant, also ordered the immediate de-freezing of the company’s account with JP Morgan Chase Bank in Mumbai to enable the former to remit the amount.The judge was passing interim orders on the writ petition from Cognizant challenging the tax demand and coercive action, which included freezing  of its accounts in 68 banks. 

“There shall be an order of interim stay of the Income Tax proceedings subject to the condition that Cognizant pays 15 per cent of the tax demanded and furnishes a bank guarantee or security by way of fixed deposit for the remaining tax demanded,” the judge said.For proper compliance with the condition, the attachment of its account with JP Morgan shall stand lifted forthwith. However, the attachment in respect of other banks such as SBI, Deutsche, Corporation and HDFC shall continue till the compliance with the direction. 

Similarly, the attachment of nine bank deposits to the tune of `2,650 crore shall also continue subject to the lien being created for remaining amount of taxes.The remittance of 15 per cent tax demanded shall be retained in a separate account and shall abide by the order to be passed on the petition,” the judge added and posted the matter for further hearing on April 18.The issue pertains to `2,800 crore tax demand made towards dividend distribution tax (DDT) for remitting `19,415 crore to its non-resident shareholders in the United States and Mauritius towards buy-back of 94,00,543 of its equity shares in May 2016.

The Income Tax department claimed that the principal reason for the buy-back of shares was to defeat the buy-back distribution tax (BBDT) that will be applicable even in case of reduction of shares which will be in force from June 1, 2016. “Therefore, Cognizant hurriedly repatriated its earnings to the tune of `20,000 crore (accumulated profits) from India to its investors situated abroad by way of a scheme approved by the High Court,” Assistant Solicitor General G Rajagopalan said.

The order was obtained by misleading the High Court stating that the scheme does not attract any income tax liability, fully being aware that the repatriation is liable to DDT under Income Tax Act, the department contended.Appearing for Cognizant, senior counsel P S Raman contended that since the department has frozen all its bank accounts for the past eight days, the company which has over 1.7 lakh employees across the country could not make a single rupee as payment to its vendors and service providers. “We have even deducted `800 crore as TDS for `19,415 crore paid for the buy-back and remitted it to the department,” Raman added.