In a significant development, the Supreme Court on Wednesday upheld an interim order issued by the Madras High Court, demanding that IT services giant Cognizant Technology Solutions make a partial payment of Rs 2,956 crore to the Income Tax Department. This partial payment represents a portion of the disputed tax dues related to the company's share buyback program between 2017 and 2018.
The decision by a Bench of Justices PS Narasimha and Aravind Kumar comes as a setback for Cognizant, which had challenged a September 2023 order from the Income Tax Appellate Tribunal (ITAT) demanding a total of ₹9,400 crore in taxes on the Rs 19,000 crore share buyback transactions.
According to a report of Bar and Bench, Last year, Cognizant sought legal recourse by approaching the Madras High Court to challenge a September 2023 order issued by the Income Tax Appellate Tribunal (ITAT). The ITAT order was accompanied by notices requiring the company to remit Rs 9,400 crore in taxes related to its share buybacks, totaling over Rs 19,000 crore, conducted in the years 2017 and 2018.
During that period, a Bench comprising Justices R Mahadevan and Mohammed Shaffiq documented Cognizant's plea and provisionally halted the recovery proceedings. The temporary stay was contingent upon Cognizant making a payment of ₹1,500 crore to the Income Tax department and establishing a fixed deposit amounting to Rs 1,456 crore.
The appellant/assessee shall make a payment of Rs.1500 crores in cash or give a letter to the Bank to remit Rs.1500 crores to the credit of the respondent from the fixed deposits available, and furnish property security for the balance tax liability with interest and penalty, to the respondent, within a period of four weeks from the date of receipt of a copy of this order, Bar and Bench reported.
On such payment and deposit of title deeds pertaining to the property, the respondent shall release the lien on the remaining fixed deposits lying in the Banks. In the event of default on the part of the appellant in complying with the aforesaid conditions, this order shall stand vacated automatically, without any further reference to this court; and it is also open to the Revenue to recover the tax liability from the appellant in the manner known to law, the High Court had said in its order at the time.