New Delhi: US-based IT firm Cognizant said it paid all applicable taxes related to its buyback transaction in 2016 and the Indian Income Tax Department's (ITD) position is "contrary to law and without merit". The company also sought to assure its employees that the developments will have no bearing on the recently announced promotion cycles and wage revisions.
The tech giant's comments follow ITD's freezing its certain bank accounts in the country over a dispute on payment of dividend distribution tax (DDT) running into hundreds of crores. In an e-mailed statement, a Cognizant spokesperson said the company will "continue to vigorously defend itself and will pursue all available legal remedies".
Cognizant CFO Karen McLoughlin sent out an e-mail to employees last evening reiterating its position on the tax dispute issue and emphasised that the business operations and work with clients have not been impacted by the events. "I want to reassure you that these developments will have no bearing on our ability to continue to support, reward or recognize our associates across the world... As such, your payroll and the promotion cycles and wage revisions announced by Jim Lennox last week will not be in any way impacted because of these developments," she wrote.
She added that Cognizant's balance sheet is robust with over USD 5 billion in cash and short-term investments and that the company's business continues to remain healthy. Meanwhile, the company said the Madras High Court heard the matter yesterday and has instructed the ITD not to take further action pending hearings.
"The company believes that the positions taken by the Indian Income Tax Department are contrary to law and without merit. Cognizant has paid all applicable taxes due on the transaction at issue," the spokesperson said in the statement.
The tax issue pertains to unpaid dues around share purchases done by its subsidiary, Cognizant Technology Solutions India, which had bought back shares from foreign owners -- Cognizant Mauritius and the US-based parent Cognizant Technology Solutions (CTS). Cognizant is headquartered in the US but a majority of its total employees (2.6 lakh people) are based in India.
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