11 Jan 2024 , 11:18 AM
According to an order copy issued on January 10, the Supreme Court has asked the Madras High Court to consider IT company Cognizant Technology Solution’s appeal against an income tax claim of Rs 9,400 crore within the next six weeks.
The software behemoth is battling an income tax claim for Dividend Distribution Tax (DDT) on a repurchase of shares for Rs 19,000 crore under a scheme of arrangement. The issue concerns the assessment year (AY) 2017-18, when Cognizant bought 94 lakh equity shares with a face value of Rs 10 each from its stockholders in the United States and Mauritius.
The acquisition of these shares took place at a per-share cost of Rs 20,297, amounting to a total consideration of Rs 19,080.26 crore. This transaction was executed in compliance with a scheme that received approval from the Madras High Court.
In a relief to Cognizant, the Supreme Court overruled the Madras High Court’s order and directed it to provide security for a penalty of Rs 3,301 crore. Cognizant contented that there is no penalty levied on it because it is challenging the tax demand.
The court also allowed the income tax department to encash the Rs 2,956 crore that the business paid towards the tax claim, after the government assured the court that they would reimburse the money if the IT behemoth won in the high court.
Senior counsels Mukul Rohatgi and Balbir Singh defended Cognizant, while Venkatraman, Additional Solicitor-General, represented the income-tax department.
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