April 4: Tech major Cognizant has said that it will deposit $75 million to be kept in a suspense account following the grant of an interim stay over the proceedings of the Income Tax Department by Madras High Court. Accordingly, Rs 4.9 billion, equaling 15% of the disputed tax demand from the I-T Department, will be kept in a suspense account, while the remaining amount would be marked under line.
An interim stay was granted by Madras High Court on Tuesday over the proceedings of I-T Department under the condition that Cognizant pays 15% of the tax demand while furnishing a bank guarantee or security by way of fixed deposit for the remaining amount. The overall tax demand of the department amounts to around Rs 32.66 billion
The court also lifted the attachment of the bank account for letting the company pay the said amount. Karen McLoughlin, Chief Financial Officer, Cognizant said that the company operations were unaffected despite having the bank accounts attached prior to the lifting. He also said that the company was committed to complying with law in all the jurisdictions, adding that the company will continue its defense against the I-T Department’s assertions and other tax disputes.
The I-T Department recently asserted Cognizant of owing additional taxes in relation to a share buyback worth $2.8 billion. The transaction was undertaken by the principal operating subsidiary of Cognizant in India to acquire shares from overseas shareholders.
Cognizant had pair around $135 million (Rs 9 billion) in the transaction, believing it to be the applicable taxes it owes according to Indian law. However, the I-T department has alleged that Cognizant evaded Dividend Distribution Tax (DDT) on some transactions while buying shares of Mauritius and US companies of Cognizant.