Income Tax department again seeks bribery documents from Cognizant

The income tax department has revived its demand that Cognizant provide documents related to the bribes it had paid to Tamil Nadu government officials to secure approvals for a building. It has also begun inquiring into Cognizant’s withdrawal of a depreciation claim on the building, people familiar with the development told ET.

“They (Cognizant) had withdrawn the claim of depreciation on the asset for which improper payments were made,” an income tax official told ET. “Our inquiries are related to that.”

The information technology company has until March 10 to provide documents related to the illegal payments, the person said. Income tax rules allow companies to claim depreciation on commercial buildings.

Cognizant had voluntarily disclosed to the US Securities and Exchange Commission in September 2016 the payment of bribes after it uncovered the 2014 payments in internal audits.

Two Execs Indicted
The firm also reported the episode to the US Department of Justice (DoJ), following which two top executives quit — Gordon J Coburn, who was president, and Steven Schwartz, the chief legal and corporate affairs officer. The two executives were indicted under the Foreign Corrupt Practices Act (FCPA) in the US for approving the illegal payments.

The company said February 15 that it will pay $28 million as penalty and that the US justice department will not take further action, considering its “prompt self-reporting” and compliance enhancements. The Indian income tax department had sought records relating to the bribe payments after Cognizant reported them to the US authorities in 2016, but the software exporter had said at the time that it was unable to submit them in view of ongoing court proceedings in that country.

“With the resolution of the court matters relating to Cognizant, we have sought the records again,” said the tax official. Cognizant did not respond to queries.

In the US indictment order, a construction company that had been the contractor for the Cognizant KITS campus near Chennai was said to have acted as a conduit for the bribe payments. Larsen and Toubro subsequently issued a statement saying that “it was not aware of any evidence that supports its involvement in the alleged bribery”.

ET reported February 17 that Cognizant had withheld $17 million of payments to a construction company to apply pressure and help secure permissions. The construction firm had hired a third-party consultant to pay around $2 million in bribes to government officials in Tamil Nadu, the US District Court for the District of New Jersey said in the indictment order.

The executives had approved the plan via two video-conference calls in April 2014. They agreed to reimburse the construction company by inflating invoices and pay in instalments. The consultant was paid $500,000.