Cognizant’s 19,000cr buyback attracts dividend tax: Tribunal

Chennai: The Income Tax Appellate Tribunal – Chennai bench on Wednesday ordered that a Rs 19,000-crore share buyback undertaken by technology major Cognizant in 2017-18 attracts dividend distribution tax of Rs 4,853 crore. The ITAT’s ruling dismissed an appeal filed by Cognizant.

Cognizant conducted a share buyback through a scheme approved by the Madras high court during assessment year 2017–18, whereby the company bought over 94 lakh equity shares from its shareholders in the US and Mauritius at a rate of Rs 20,297 per share.

The department noted that Cognizant is trying to position a dividend payout as a buyback to evade tax, and the high court’s approval of the scheme does not grant immunity to them from paying tax on it.