HC tells CTS to pay ₹420cr tax in two days, de-freezes bank a/c
Sureshkumar.K@timesgroup.com 04.04.2018
Chennai: The Madras high court has ordered Cognizant Technology Solutions, embroiled in a ₹2,800-crore tax dispute with the I-T department, to pay 15% of the tax demand in two days. To facilitate the payment, the court ordered de-freezing of the company’s bank account with JP Morgan, Mumbai.
“There shall be an order of interim stay of the income tax proceeding, subject to the condition that Cognizant pays 15% of the tax demanded, and furnishes a bank guarantee or security by way of fixed deposit for the remaining. For proper compliance, the attachment of bank account with J P Morgan Chase Bank, Mumbai, shall stand lifted. However, the attachment in respect of accounts with SBI, Deutsche, Corporation and HDFC Bank shall continue till the compliance of the order. Similarly, the attachment of bank deposits to the tune of ₹2,650 crore shall continue subject to the lien being created for the remaining amount,” the court said.
15% tax should be retained in a separate account
Justice T S Sivagnanam passed the interim direction on Tuesday, on a plea moved by Cognizant assailing the tax demand and the freezing of its 68 bank accounts. Remittance of 15% of the tax demanded shall be retained in a separate account and shall abide by the order to be passed in the plea, Justice Sivagnanam said and posted the plea to April 18 for further hearing.
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 buyback of 94,00,543 of its equity shares in May 2016.
The I-T department claimed the principal reason for the buyback of shares was to defeat the buyback 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,” additional solicitor-general G Rajagopalan said.
The order was obtained by misleading the high court saying the scheme did not attract any I-T liability fully aware that the repatriation was liable to DDT under Income Tax Act, the department said.
Appearing for Cognizant, senior counsel P S Raman contended that since the department had frozen all its bank accounts for the past eight days, the company with 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 buyback and remitted it to the department,” Raman said.
Sureshkumar.K@timesgroup.com 04.04.2018
Chennai: The Madras high court has ordered Cognizant Technology Solutions, embroiled in a ₹2,800-crore tax dispute with the I-T department, to pay 15% of the tax demand in two days. To facilitate the payment, the court ordered de-freezing of the company’s bank account with JP Morgan, Mumbai.
“There shall be an order of interim stay of the income tax proceeding, subject to the condition that Cognizant pays 15% of the tax demanded, and furnishes a bank guarantee or security by way of fixed deposit for the remaining. For proper compliance, the attachment of bank account with J P Morgan Chase Bank, Mumbai, shall stand lifted. However, the attachment in respect of accounts with SBI, Deutsche, Corporation and HDFC Bank shall continue till the compliance of the order. Similarly, the attachment of bank deposits to the tune of ₹2,650 crore shall continue subject to the lien being created for the remaining amount,” the court said.
15% tax should be retained in a separate account
Justice T S Sivagnanam passed the interim direction on Tuesday, on a plea moved by Cognizant assailing the tax demand and the freezing of its 68 bank accounts. Remittance of 15% of the tax demanded shall be retained in a separate account and shall abide by the order to be passed in the plea, Justice Sivagnanam said and posted the plea to April 18 for further hearing.
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 buyback of 94,00,543 of its equity shares in May 2016.
The I-T department claimed the principal reason for the buyback of shares was to defeat the buyback 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,” additional solicitor-general G Rajagopalan said.
The order was obtained by misleading the high court saying the scheme did not attract any I-T liability fully aware that the repatriation was liable to DDT under Income Tax Act, the department said.
Appearing for Cognizant, senior counsel P S Raman contended that since the department had frozen all its bank accounts for the past eight days, the company with 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 buyback and remitted it to the department,” Raman said.
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