After finding out tax evasion by the IT Giant Cognizant in dividend distribution tax, the Income Tax department had frozen the accounts, as per the reports of IT Department, Cognizant has failed to pay around 2500 crores of DDT in FY 2017. The dividend distribution tax is a special tax to be paid by any company in India, which declares dividends to shareholders. 20% will be levied on dividends paid.
Cognizant failed to deduct tax on the payment made to a Mauritius based subsidiary, and also deducted 10% TDS from US company. CTS were supposed to pay DDT of 2500 crores in 2016-17 them and had failed to pay that. Though according section 77 of 1956 companies act, companies were prohibited from buying their own shares, it was amended for companies to buy back own shares, but Cognizant doesn't have this exception.
Cognizant had also got involved in
doing illegal payments through an Indian company and claimed them as expenses
in IT returns of 2014, 15 and 16 financial years. Cognizant will be prosecuted
for 3 years, and was seen diverting profits to the Mauritius subsidiary.
However Cognizant says that they have paid all the taxes and has said that will
face all the charges legally. Cognizant had moved to the Madras high court and
the court had instructed IT not to proceed with any action until next hearing.
