The Income Tax Department has frozen Cognizant Technology Solution India Pvt Ltd.’s bank accounts and deposits due to over tax irregularities.
Reportedly, Cognizant has evaded the Dividend Distribution Tax to the tune of Rs 2,500 crore to the Government.
A senior tax Official reportedly said that “As per the Income Tax Act, DDT needs to be paid on any distribution, reduction of capital, to the extent of accumulated profits defined as dividends. The only exception to this is the buy-back under Section 77A of the Companies Act and CTS was not covered. Therefore, CTS was required to pay DDT to the extent of Rs 2,500 crore in the financial year 2016-17 itself, but has not paid so far,”
The Income Tax while releasing the order discussed that CTS purchased its shares through shareholders by making arrangements and compromise between them and the company.
In order to solve this issue, Cognizant after one week of freezing their account approached the High Court against the Tax Department and said that it had paid all applicable taxes due on the transaction.
However, the Court has instructed the tax department not to take further action while pending further hearings.
