CHENNAI: A division bench of Madras High Court consisting of Justices R Mahadevan and Mohammed Shaffiq has granted an interim stay against the Income Tax department’s notice to liquidate Rs 2,956 crore security furnished by Cognizant Technology Solutions India Limited.
The order was passed on a petition filed by the company seeking stay on an order of the Income Tax Appellate Tribunal (ITAT) rejecting its petition against order of demand of tax and notice for liquidation.
Even though the interim stay was granted, the company was ordered to deposit Rs 1,500 crore to the credit of I-T department.
“The appellant has to make a payment of Rs 1500 crore in cash or give a letter to the bank to remit the amount to the credit of the respondent (I-T dept) from the fixed deposits available, and furnish property security for the balance tax liability with interest and penalty within a period of four weeks,” the bench said in the order passed recently.
It directed the I-T department to release the lien (legal claim against assets of collateral security) on the remaining fixed deposits lying in the banks after such payment was made and deposit of title deeds pertaining to the property. The court added a rider that in the event of default of payment by the appellant, the interim order of stay shall stand vacated automatically.
The matter pertains to I-T department imposing Rs 9,403 crore tax on Rs 19,000-crore buyback shares of the company by “considering the buyback as dividend”. But the company contended that the buyback shares is taxable only as “capital gains” in the hands of the shareholders under section 46 A of I-T Act” and section 115 QA clearly indicates the legislative intent and taxation framework that purchase of its own shares under the scheme was covered under section 46 A.
The department had issued notice for liquidating Rs 2,956 crore and remit it to it, the counsel said, and submitted that if it is done, it will paralyse the company’s operations. However, counsel for I-T department submitted that notice was issued to liquidate Rs 2,956 crore fixed deposit belonging to the company against an existing liability of Rs 4,358 crore; along with interest liability of Rs 1,743 crores, the total aggregates to Rs 6,101 crore.
