I-T freezes Cognizant’s bank accounts in Chennai, Mumbai over Rs2,500-cr tax dues
28 Mar 2018
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The Income Tax Department has frozen the bank accounts of Cognizant Technology Solutions Corporation in Chennai and Mumbai for allegedly evading dividend distribution tax (DDT) amounting to Rs2,500 crore, says reports
Cognizant is reported to have failed to pay dividend distribution tax of more than Rs2,500 crore ($385 million) in the 2016-17 financial year.
The I-T department raised this claim following Cognizant’s share buyback offer in 2016.
“CTS had paid only the face value of Rs10 from the share capital and entire balance was paid from the accumulated profits, which was dividend on which DDT of more than Rs2,500 crore was not paid,” a notice by the tax authorities stated.
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 per cent of the total dividends paid by the company.
Cognizant said it had paid all applicable taxes due on the transaction, adding that it has approached the high court against the I-T Department’s action.
A Cognizant spokesman also said the court has instructed the tax department not to take further action pending further hearings.
Although the company’s accounts were frozen a week ago, Cognizant said it has not affected normal business.
“Cognizant’s business operations, our associates and our work with clients are not impacted by actions recently attempted by the Indian income tax department,” the company said without giving further details.
The US-listed IT services company has significant operations in India with more than 260,000 employees.
Cognizant, which is listed on Nasdaq, has over 70 per cent of its employees present in India with holding companies registered in Mauritius and headquarters in the US.
