Cognizant tax dispute: ‘Operations remain unaffected’ by tax dispute, says CFO Karen McLoughlin


Cognizant will deposit $75 million (Rs 420 crore), representing 15 percent of the disputed tax, to be kept in a suspense account by the ITD (Income Tax Department), with the remainder marked under lien, said the company in a press release.

The Court further granted the request of Cognizant to address the ITD’s collection actions and scheduled a hearing later in April 2018. “Our operations remain unaffected,” said Karen McLoughlin, Chief Financial Officer, Cognizant. “This dispute is with respect to a lawful, fully reviewed and disclosed transaction, and we are pleased with today’s decision that restores appropriate due process. Cognizant is committed to complying with the law in all jurisdictions in which we operate, and we will continue our defense against the assertions of the Indian Income Tax Department in this and other tax disputes.”

The underlying dispute involves the Indian Income Tax Department’s recent assertion that it is owed additional taxes in connection with a 2016 $2.8 billion share buyback transaction undertaken by Cognizant’s principal operating subsidiary in India.

In that transaction, undertaken pursuant to a plan approved by the Madras High Court, Cognizant paid approximately $135 million (Rs 9 billion) in Indian income taxes, which it believes are all applicable taxes owed according to Indian law, the company said in a statement.

The Madras High Court on Tuesday granted interim stay on Income Tax department proceedings against Cognizant, subject to the firm depositing 15 percent of Rs 2,800 crore dividend distribution tax demanded by the department, a PTI report said.

The company has filed a plea in the court seeking stay of recovery proceedings as the I-T department had frozen some of its bank accounts.


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