Case Law Details
Cognizant Technology Solutions India Private Limited Vs ACIT (Madras High Court)
Introduction: The appellant, Cognizant Technology Solutions India Private Limited, has approached the Madras High Court challenging the order dated 13.09.2023 passed by the Income Tax Appellate Tribunal (‘D’ Bench, Chennai) in ITA No.269/Chny/2022 for the Assessment Year 2017-18. The appeal relates to the taxation of the consideration paid by the appellant for the purchase of its own shares under a sanctioned Scheme. The appellant has sought interim stay against recovery proceedings initiated by the Income Tax Department.
Background: The appellant contends that the purchase of its own shares is taxable only as capital gains in the hands of the shareholders under section 46A of the Income Tax Act, 1961. The Tribunal, however, treated the consideration paid for the share purchase as dividend under section 2(22) of the Act, leading to tax liability under section 115-O. The appellant challenges this interpretation, arguing that subsequent amendments in section 115QA indicate legislative intent to cover such transactions under section 46A.
Interim Stay Petition: The appellant, in the present miscellaneous petition, seeks an interim stay on all recovery proceedings initiated by the Income Tax Department following the impugned Tribunal order. The appellant argues that it is liable to pay a significant dividend distribution tax, and a substantial amount is already secured and available with the Revenue. The appellant has proposed to make a substantial payment and furnish property security to secure the remaining tax liability.
Contentions: The appellant’s principal contention is that the Tribunal erred in treating the share purchase consideration as a dividend, and the subsequent tax demand is substantial. The appellant emphasizes its willingness to make a substantial payment and furnish property security to secure the tax liability, asserting the financial difficulty it would face if the lien on fixed deposits is not lifted.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
