Income Tax office slaps Rs. 577-cr tax demand notice on Infosys

Business

oi-Sneha

By Sneha B K

Published: Monday, May 20, 2013, 9:39 [IST]

Income Tax department has slapped a fresh Rs. 577-crore tax demand notice on Infosys for 2009-10 assessment year, adding to the tax woes of India's second largest IT firm.

The Bangalore-based software services exporter said that it is in process of seeking legal recourse against the fresh tax demand notice .The IT major is already contesting additional Income Tax demands of about Rs. 1,175 crore ($214 million) for four fiscals years beginning 2005.

Infosys, which is also a US-listed company, in a filing to the US Securities and Exchange Commission (SEC) last week had said : "The company has received the assessment order from the Income tax authorities for fiscal 2009 on May 2, 2013 along with a demand order for an amount of $ 106 million."

Meanwhile, an Infosys spokesperson told PTI: "We have received the assessment order for the assessment year 2009-10 demanding a net tax of Rs. 577 crore."

"The assessment followed the order of the assessment year 2007-08 and 2008-09 that did not allow tax benefits on income from onsite software development revenue from SEZ, disregarding the latest clarification issued by the CBDT in a circular on January 17.

"Infosys is in the process of filing an appeal before the Commissioner of Income Tax," the spokesperson added.

In the SEC filing, Infosys added, "As the company is contesting this position like earlier years, the appellate authority would be approached within the time limit prescribed under the relevant law."

Infosys is already facing tax demands worth $214 million for fiscal 2005 to fiscal 2008 "mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income Tax Act".

"The company has received demands from the Indian IT authorities for payments of additional taxes totalling $214 million, including interest of $62 million upon completion of their tax review for fiscal 2005, fiscal 2006, fiscal 2007 and fiscal 2008," it said in the filing.

The deductible amount is determined by the ratio of export turnover to total turnover. The disallowance arose from certain expenses incurred in foreign currency being reduced from export turnover, but not reduced from total turnover, it added.

The tax demand for fiscal 2007 and fiscal 2008 also includes disallowance of portion of profit earned outside India from the STP units and disallowance of profits earned from SEZ units, it said.

"The matter for fiscal 2005, fiscal 2006, fiscal 2007 and fiscal 2008 are pending before the Commissioner of Income tax (Appeals) Bangalore," Infosys said in the filing.

Infosys added that its position in the cases relating to tax demands is strong and it expects to win the appeal. "The company is contesting the demand and the management, including its tax advisers, believes that its position will likely be upheld in the appellate process.

"The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company's financial position and results of operations," it added.

On taxes in India, Infosys said in the filing "The company, as an Indian resident, is required to pay taxes in India on the company's entire global income in accordance with Section 5 of the Indian Income Tax Act, 1961, which taxes are reflected as domestic taxes."

PTI