Congizant gets HC relief in ₹9400 crore tax case

In a major relief for the tech form, the Madras High Court decided to stay the tax demand of 9,403.09 crore against Cognizant Technology. The case revolves around Cognizant buying back its shares worth 19,000 crore, subject to payment of 1,500 crore.

Cognizant is currently facing legal pressure from both Wipro and Infosys.
Cognizant is currently facing legal pressure from both Wipro and Infosys.

The Madras HC bench ordered Cognizant to pay a sum of 1500 crore as tax within a period of four weeks. The bench also asked the tax department to release information regarding the property and remaining fixed deposits lying in the banks, pertaining to the case, reported The Economic Times.

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In its order, the court said, “It is also open to the department to recover the tax liability from the appellant in the manner known to law.” However, if Cognizant fails to meet the weekly payments, the court shall automatically vacate the order, ET reported.

The case against Cognizant dates back to the fiscal year of 2017-2018, when the tech giant decided to buy back around 9.4 million equity shares of the company from shareholders in US and Mauritius.

The total buyback was done at 20,297 per share, coming up to 19,080 crore. However, the assessing officer of the deal demanded that Cognizant pay dividend tax on the transaction, which was upheld by the Commissioner of Income Tax (Appeals).

Legal pressure continues to mount for Cognizant

Not only the tax payment case, but Cognizant is also facing accusations of using “unethical poaching tactics” to employ people from rival firms. Both Wipro and Infosys have sent a notice to Cognizant over poaching top executives from their firms over the last few months.

The troubles for Cognizant mounted when Wipro filed a lawsuit against former CFO Jatin Dalal and executive Mohd Haque after they joined the rival tech firm. Infosys also issued a notice to Cognizant after four of its top executives were “unethically poached” by the company.

“Non-compete rules might not hold water, but this message to Cognizant was more like a warning,” said a source quoted by Moneycontrol. The poaching row between the companies erupted when Cognizant completed its hiring of 20 top executives in the company.

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