SC upholds HC order directing Cognizant to pay Rs 2,956 crore to IT dept

The Supreme Court recently upheld an interim order passed by the Madras High Court directing tech company Cognizant Technology Solutions to pay Rs 2,956 crore to the Income Tax (IT) Department as part payment of its tax dues.

A Bench of Justices PS Narasimha and Aravind Kumar directed the High Court to decide the matter within six weeks. “In view of the high stakes involved in the matter, we request the High Court to take up the appeal and dispose of it as expeditiously as possible, preferably within a period of six weeks from today,” the order said.

The court noted the submission of the IT department that if Cognizant Technology Solutions succeeds with its appeal in the High Court, the amount will be refunded within four weeks along with the interest accrued.

“The amount of Rs 2,956 crore, comprising Rs 1,500 crore offered by way of cash and Rs 1,456 crore towards Fixed Deposit Receipts (FDRs), can be encashed by the Union. We also record the undertaking of the learned Additional Solicitor General (ASG), who, on instructions, submitted that the amount will be refunded within four weeks along with the interest accrued in the event the petitioner’s appeals are allowed by the High Court. The requirement of security with respect to the penalty is dispensed with,” the order read.

The tech company had challenged a September 2023 order passed by the Income Tax Appellate Tribunal (ITAT) before the Madras High Court. It had also challenged the department’s notices demanding that the company should pay Rs 9,400 crore in taxes in connection with its share buybacks worth over Rs 19,000 crore between 2017 and 2018.

Cognizant, in December last year, sought an interim stay on all recovery proceedings against it and offered to pay the base amount of Rs 1,500 crore in cash.

The High Court then temporarily stayed the recovery proceedings on the condition that Cognizant pays the IT department Rs 1,500 crore and creates a fixed deposit worth Rs 1,456 crore.

"The appellant/assessee shall make a payment of Rs 1,500 crore in cash or give a letter to the Bank to remit Rs 1,500 crore to the credit of the respondent from the fixed deposits available, and furnish property security for the balance tax liability with interest and penalty, to the respondent, within a period of four weeks from the date of receipt of a copy of this order. On such payment and deposit of title deeds pertaining to the property, the respondent shall release the lien on the remaining fixed deposits lying in the Banks. In the event of default on the part of the appellant in complying with the aforesaid conditions, this order shall stand vacated automatically, without any further reference to this court; and it is also open to the Revenue to recover the tax liability from the appellant in the manner known to law," the High Court order said.

Cognizant had then filed a petition against this order in the Supreme Court.