Cognizant’s Bank Account Suffers A Freeze For Not Making Tax Payments In Crores


Cognizant Technology Solutions India P Ltd (CTS) has recently suffered a bank account freeze worth Rs. 2,500 crore as the firm owes the amount as Dividend Distribution Tax (DDT) to the government.


Income Tax Act


A senior tax official mentioned that DDT has to be paid for any distribution, reduction of capital, to the extent of accumulated profits which are called ‘dividends’ as per the Income Tax Act. Under this Act, there is only one exception- the buy-back under section 77A of the Companies Act as well as CTS is not covered.

Cognizant was supposed to pay this Rs. 2,500 crore amount in the financial year 2016-17 itself, but has still not paid the same; thus leading to its account freeze.


Cognizant Purchased Its Own Shares


Cognizant is said to have purchased its own shares from the shareholders in the month of May, 2016. The firm made this purchase under the ‘scheme of arrangement and compromise’ between the company and shareholders.

An official was heard saying- “The shareholders are a Mauritius entity and an American company, holding 54% and 46% of shares, respectively. Cognizant did not deduct tax on the remittances to the Mauritius company, but deducted 10% as tax on the remittances to the US company,”.


No Impact On The Clients


A Cognizant’s spokesperson was also heard saying that the company’s associations and works with its clients have not faced any impact due this incident. Also, that the HC has instructed the I-T department to not take any other action till the further pending hearings.

“Cognizant has paid all applicable taxes due on the transaction at issue. The company will vigorously continue to defend itself and will pursue all available legal remedies”, an official of the firm was heard saying. A few days back, news came that Cognizant is asking their top executives to quit by accepting nine months salary, what happened next, you can read out here. Even there is a massive drop in the headcount of Cognizant. This is one of the largest layoffs in the recent years, where is job security in IT industry?

Vijay Alagar
the authorVijay Alagar
Young and Ambitious; Better at Videogames than at life. Works as a creative writer by day, Batman at night.