The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has upheld a ruling mandating Cognizant Technology Solutions India to pay dividend distribution tax (DDT) of Rs 4,853.42 crore on a share buyback valued at Rs 19,000 crore. This decision comes after the company’s appeal was rejected by the ITAT, affirming that payments made for share purchases under a court-approved scheme are tantamount to distributing accumulated profits, falling under the provisions of Section 2(22) of the Income Tax Act, 1961.
Chennai ITAT Upholds Dividend Distribution Tax on Rs 19,000 Crore Share Buyback
Cognizant Technology Solutions had purchased 94,00,534 equity shares at Rs 20,297 per share from its US and Mauritius-based shareholders, as per the scheme sanctioned by the Madras High Court in the 2017-18 assessment year. Following the scrutiny of Cognizant’s returns, the Assessing Officer concluded that the company owed dividend distribution tax due to the payment structure in alignment with the Income Tax Act.
Cognizant pursued appeals, but both the Commission of Income Tax (Appeals) and the Chennai bench of ITAT affirmed the tax liability, leaving the company with a significant financial demand of Rs 4,853.42 crore.
