In a setback to Cognizant Technology Solutions India’s (CTSI) efforts against paying Rs 2,800 crore to the Income Tax Department in dividend distribution tax (DDT), the Madras High Court has rejected its plea challenging the order asking it to pay the said amount, reports Business Standard.
Moreover, a plea by Cognizant (Mauritius) and Cognizant Technology Solutions Corporation (US) was also dismissed by the court.
“Since this writ petition is dismissed, directing the petitioner to avail the appeal remedy; the Appellate Authority shall take into account the amount deposited in pursuance of the order referred supra, while entertaining the appeal,” said Justice K Kalyanasundaram in the court order.
Last year, the company had been asked to deposit Rs 495 crore in relation to the matter, which goes back to a transaction in 2013, when CTSI had bought back its shares from foreign investors at a rate of Rs 23,915 per share. The Income Tax Department claimed that the fair market value per share was only Rs 8,000.
The tax authority asserted that the transaction was a scheme employed to avoid paying Dividend Distribution Tax (DDT), as the company had not paid dividends since 2003 and the same was now being paid out by way of excess consideration in the buyback.