Madras HC: Approach Dispute Resolution Panel Over 2017 Tax Dispute

Writ petitions filed over tax disputes relating to buy-back of shares by Cognizant Technology Solutions India Private Limited (Cognizant) and two of its foreign shareholders, viz. Cognizant (Mauritius) Limited and New Jersey-based Cognizant Technology Solutions Corporation, were dismissed by the Madras High Court Justice K. Kalyanasundaram on grounds of maintainability.

The two shareholders, viz. Cognizant Mauritius and Jersey-based Cognizant contended that the draft assessment order involved a violation of the principles of natural justice. On their part, the IT department countered that the petitioners devised dubious transaction to pay exorbitant amounts for the shares to avoid paying Dividend Distribution Tax (DDT) and Buyback Distribution Tax (BBDT).

Without going into the merits of the case, the Court noted the Income Tax Act provided for a Dispute Resolution Panel consisting of experts in the field and dismissed the writ petitions directing them to approach the Dispute Resolution Panel within two weeks.

Cognizant was also directed to approach the Appellate Authority with regard to another IT order directing Cognizant to pay tax at 15% of the total payment amounting to Rs.19,415 crore along with interest under Section 115P of the IT Act.

Senior Advocates Gopal Subramaniam and Srinath Sridevan appeared for Cognizant and its shareholders. Additional Solicitor General G. Rajagopalan and Karthik Ranganathan Senior Standing Counsel, appeared for the IT Department.