Judge recuses himself from hearing CTS’ Rs 2,800 cr tax dispute

When the plea moved by Cognizant challenging the tax demand made by I-T department came up for hearing on Tuesday, the judge announced his decision to recuse himself from the case without assigning any reason. Justice Sivagnanam then referred the plea to Chief Justice Indira Banerjee to assign it to another single judge. The issue pertains to Rs 2,800-crore demand made by the I-T in connection with the alleged transfer of Rs 19,415 crore made by Cognizant Technology Solutions (India) to its non-resident shareholders in the United States and Mauritius through a share buyback scheme. After the demand, the department froze all the bank accounts of the company, prompting the firm to approach the high court. 

In April last, as an interim measure the court ordered CTS to pay 15% (Rs 420 crore) of the demanded amount in two days. To facilitate the payment, the court ordered unfreezing of the company’s bank account with JP Morgan, Mumbai.

The primary allegation of the department is that Cognizant processed the buyback scheme ahead of the Finance Bill 2016 which came into effect on June 1, 2016. The bill widened the scope of additional income tax payable on share buyback.