Cognizant Technology Solutions (India) Private Limited has moved the Madras High Court challenging an order passed by the Income Tax Appellate Tribunal (ITAT) on May 27 directing the company to pay ₹475.68 crore before June 15 as a pre-condition to stay the outstanding tax demand of ₹4,358.17 crore for the assessment year 2017-18.
Justices R. Mahadevan and Mohammed Shaffiq on Monday adjourned the hearing on the company’s tax case appeal to Thursday at the request of Additional Solicitor General R. Sankaranarayanan, who assured the appellant’s counsel Arvind P. Dattar that no coercive action would be taken until the next hearing of the case.
In the meantime, the judges also directed Income Tax Department’s senior standing counsel A.P. Srinivas to take notice and obtain instructions. In its affidavit, the company claimed that the order to pay ₹475.68 crore was unwarranted since already “excess security” running to a few thousand crore rupees was lying with the department.
The ITAT in its order pointed out that the dispute was related to the company having purchased its own shares from its shareholders. The Assessing Officer had treated the transaction as a reduction of capital and arrived at the conclusion that the amount was taxable. The assessment order was taken on appeal before the tribunal.
Though the company claimed that it had remitted ₹898.01 crore as capital gain tax, and the money was available for servicing the disputed demand of the assessee, the ITAT refused to accept the claim on the ground that the TDS (tax deducted at source) had been remitted in the name of the shareholders on their tax liability.
“It is not ascertainable whether shareholders have claimed credit for TDS in the return of income or not. Thus, same cannot be considered as tax paid by the assessee for the outstanding demand,” the tribunal said and pointed out that the company had so far paid only ₹495 crore pursuant to an order passed by the High Court on April 3, 2018.
Stating that at least 20% of the outstanding amount must be paid for granting stay against the outstanding amount, the tribunal directed the company to pay another ₹475.68 crore. Assailing the direction, Mr. Dattar told the Division Bench that the Income Tax Department had a lien over the assessee’s fixed deposits to the tune of ₹2,956.85 crore.
The company was unable to use the money in fixed deposits, and in such circumstances, it was unfair to expect the company to pay more despite it having a very good case in the appeal before the tribunal, he said.
