 "Cognizant")
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an appeal of Cognizant Technology Solutions India and ruled that the company is liable to pay Dividend Distribution Tax (DDT) on buyback of Rs 19,000 crore worth of shares under a scheme of arrangement.
Dismissing the appeal of Cognizant Technology Solutions India, ITAT held that the consideration paid by the company for purchase of its own shares in accordance with the scheme sanctioned by the Madras High Court "amounts to distribution of accumulated profits which entails release of all or part of assets of a company on reduction of capital which attracts provisions of Sec.2(22) of the Income Tax Act, 1961."
Cognizant Technology Solutions in the assessment year 2017-18 purchased 94,00,534 equity shares of face value Rs 10 from its shareholders based in the US and Mauritius at Rs 20,297 apiece for a total consideration of Rs 19,080.26 crore in accordance with a scheme approved by the Madras High Court.
On scrutiny of the returns filed by the Cognizant, the assessing officer raised a demand of Rs 4,853.42 crore on the ground that the company was liable to pay dividend distribution tax as the consideration paid by the Cognizant to its shareholders was nothing but reduction of capital under relevant sections of the Income Tax Act.
Cognizant preferred an appeal with the Commission of Income Tax (Appeals) which upheld the decision of the assessing officer.
Thereafter, the company took up the matter with the Chennai bench of the ITAT.
The appellate tribunal also did not provide any relief to the company and held that Cognizant was liable to pay the dividend distribution tax.
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