In the context of Cognizant under the scanner of the I-T Department for allegedly evading dividend distribution tax, the Income Tax Department has frozen some bank accounts and deposits held by software exporter Cognizant Technology Solutions, confirmed a highly placed official with the Income Tax Department.Cognizant’s accounts were frozen about a week back.
Cognizant’s accounts were frozen about a week back.
The move came after the department had sent tax evasion notice to the tune of Rs 2,500 crore by the India unit of Cognizant, one of the country’s largest software firms. The allegation against Cognizant is that while the company had distributed dividends to its parent company in 2016-17, it should have been subject to Dividend Distribution Tax, which is levied at 20% of the extent of total dividends paid by the company. This amount has come up to Rs 2,500 crore.
The accounts were frozen about a week back.
According to the official, who spoke exclusively to ET: “Income Tax Act requires Dividend Distribution Tax on any distribution, on reduction of capital, to the extent accumulated profits defined as dividends… CTS was required to pay DDT of more than Rs 2500 crore in FY2016-17 itself but failed to pay.”
Queries have been sent to Cognizant on the move by the I-T Department to freeze its bank assets.
To an earlier query on the notices sent to Cognizant on dividend distribution tax evasion, Cognizant had said: “In the normal course of business and from time to time, we review and discuss certain large transactions with the relevant tax authorities and, as always, will respond appropriately to any inquiries. Cognizant is committed to compliance with the law in all jurisdictions in which it operates.”