The Supreme Court of India today, upheld an interim order issued by the Madras High Court last December, directing tech giant Cognizant Technology Solutions to make a partial payment of ₹2,956 crore to the Income Tax Department. The decision, made by a bench of Justices PS Narasimha and Aravind Kumar, also granted permission for the Central government to encash the specified amount. The Income Tax Department assured that the amount and accrued interest would be refunded to Cognizant if the company succeeded in its appeal before the High Court.

Cognizant had initially contested a September 2023 order from the Income Tax Appellate Tribunal (ITAT) and subsequent notices demanding a substantial tax payment of ₹9,400 crore. These demands were related to Cognizant's share buybacks, totaling over ₹19,000 crore, conducted between 2017 and 2018.

Seeking relief, Cognizant approached the Madras High Court in December of the previous year, requesting an interim stay on all recovery proceedings. The company offered to make a cash payment of ₹1,500 crore and create a fixed deposit of ₹1,456 crore. The High Court, presided over by Justices R Mahadevan and Mohammed Shaffiq, granted a temporary stay on recovery proceedings under the condition that Cognizant fulfills the specified financial obligations and provides property security for the remaining tax liability.

The High Court order stated, "The appellant/assessee shall make a payment of Rs.1500 crores in cash or give a letter to the Bank to remit Rs.1500 crores to the credit of the respondent from the fixed deposits available, and furnish property security for the balance tax liability with interest and penalty, to the respondent, within a period of four weeks from the date of receipt of a copy of this order."

In response to this, Cognizant filed a Special Leave Petition (SLP) before the Supreme Court challenging the interim order. The Supreme Court, in its recent ruling, upheld the Madras High Court's decision and directed the High Court to expedite the appeal process, urging a resolution within six weeks.

Senior Advocates Mukul Rohatgi and Balbir Singh, along with Advocates Tushar Jarwal, Anuradha Dutt, Rahul Sateeja, Pranav Bansal, and B Vijayalakshmi Menon, represented Cognizant. On the other side, Additional Solicitor General N Venkatraman and Advocates Raj Bahadur Yadav, Rupesh Kumar, Amit Sharma B, Anirudh Bhat, and Debojyoti Mukhopadhyay appeared on behalf of the Income Tax Department.

Case: M/S COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LIMITED vs ASSISTANT COMMISSIONER OF INCOME TAX,

Petition(s) for Special Leave to Appeal (C) No(s). 206/2024.

Click to read/download order.