Income Tax (I-T) Crackdown On Cognizant. Latest Developments In The Case

The Information Technology services company Cognizant Technology Solutions got a relief, albeit temporarily, from the income tax (I-T) crackdown on Tuesday after Chennai High Court paved way for lifting the income tax department's freeze on the company's bank accounts. The tax department had frozen the bank accounts of Cognizant last month for allegedly evading a dividend distribution tax (DDT) amounting to over Rs 2,912 crore following a share buyback, according to a report in Hindu.

Income Tax Crackdown On Cognizant. Five Things To Know

1. The income tax department's freeze will be lifted on the condition that Cognizant will pay 15% of the Rs 2,912 crore dividend distribution tax (that amounts to over Rs 400 crore) demanded by the income tax department's Chennai unit, reported Press Trust of India. Cognizant said the court further granted its request to address the tax department's collection actions and scheduled a hearing later in April 2018.

2. The high court granted relief after Cognizant's counsel, in the court, contented that the company was not in a position to pay even a tea shop since all its 68 bank accounts nationwide had been frozen by the income tax department's Chennai unit.

3. Following the relief, Cognizant shares rose nearly 1 percent in late afternoon trading on the Nasdaq, reported Reuters on Wednesday. 

4. Cognizant has downplayed the income tax crackdown by claiming that the company's operations will not get affected by the case.

"Cognizant's business operations, our associates and our work with clients are not impacted by actions recently attempted by the Indian Income Tax Department," the company said.

5. Cognizant, the US-listed IT services, has significant operations in India where the majority of its 260,000 employees reside.

(With inputs from PTI, Thomson Reuters)