Info-tech

Madras HC junks Cognizant’s plea against I-T dept’s ₹2,912 cr demand

Our Bureau Chennai | Updated on June 25, 2019 Published on June 25, 2019

Dismissing Cognizant’s petition, Justice K Kalyanasundaram directed the company to exhaust all other available legal remedies before approaching the High Court   -  istock/Kuzma

Firm had challenged the department’s demand for dividend distribution tax

The Madras High Court has dismissed a plea by Cognizant Technology Solutions (CTS) challenging the recovery proceedings initiated by the Income Tax department for non-payment of ₹2,912.25 crore dividend distribution tax (DDT).

Dismissing Cognizant’s petition, Justice K Kalyanasundaram directed the company to exhaust all other available legal remedies before approaching the High Court.

‘No valid ground’

Cognizant challenged the I-T department’s recovery proceedings for alleged non-payment of DDT at 15 per cent on remittance of ₹19,415 crore to its non-resident shareholders in the US and Mauritius. In June 2018, Justice TS Sivagnanam, who had heard the case for nearly six months, recused himself from the case.

In the order, on Tuesday, Justice Kalyanasundaram said, “In this case, an unsuccessful attempt has been made by the petitioner [Cognizant] to bypass the appeal remedy, but, I find no valid ground to entertain the Writ Petition. In that view, the Writ Petition is dismissed as not maintainable at this stage.”

The Senior Counsel for Cognizant said India needs Foreign Direct Investment (FDI) for developmental activities and investments have been made by foreign companies, based on the invitation by the Centre and State governments. While so, if they are harassed by the officials by making unreasonable demand, it would seriously affect the FDI.

“Such situation does not arise here and I find no such harassment in the matter on hand,” the order said. “The Writ Petition fails and the same is dismissed. However, liberty is given to the petitioner to prefer an appeal within a period of four weeks from today (Tuesday).

If such an appeal is filed within the stipulated time, the Appellate Authority shall dispose of the same on merits, after providing sufficient opportunity of hearing to the petitioner. It is needless to mention that the above observations have been made only to reach a prima facie conclusion,” the order said. Reacting to the High Court’s order, a Cognizant spokesperson said the company will now appeal the order with the Division Bench.

He said Cognizant is firm on its stance that the recovery proceedings initiated by the IT department are improper and that no additional taxes are owed. Its operations remain unaffected by this litigation, which has been going on for more than a year, the spokesperson added.

Published on June 25, 2019
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