The Income Tax department gave a shock to IT Major Cognizant Technology Solutions India(CTS) by freezing the company's accounts in Mumbai and Chennai. IT dept. says that the American based company has to pay Rs.2,500 dividend distribution tax to the government but it has not paid the tax till now.
DDT needs to be paid on any distribution, reduction of capital to the extent of accumulated profits defined as dividends as per the income tax rules. IT department says that Cognizant purchased its own shares from shareholders in May 2016. They say that CTS had to pay Rs.2,500 in 2016-17 itself but the company has not paid the DDT till now.
On the other hand, CTS says that the steps taken by the IT department are against the law. They have assured that the company's business operations, their work, their associates will not be impacted by the development. It has clarified that they have already paid all the applicable taxes on those transactions. The company's spokesperson said that they will continue to defend themselves and they will pursue the available legal options.