Karnataka High Court upholds IT department tax claims against Infosys
05 Nov 2011
The country's second largest software company, Infosys, is caught up in an old tax case in which an adverse ruling could mean a significant outgo by way of tax claims.
The Income-Tax Department had claimed Rs100 crore in taxes for work carried out by the company from 1992-93, to 1996-97.
The Karnataka High Court has ruled that the work was in the nature of 'technical services', which backs the department's claims.
According to analysts, the judgment could have implications for the subsequent years too, leading to substantial tax claims against Infosys. But this would not impact Infosys alone and the impact could be felt across the industry, they say.
Indian software exporters including Infosys depute employees on overseas projects for clients with the employees working out of the client's premises. Nearly half of the revenue of Indian service providers, including Infosys, comes from work they do overseas, better known as onsite locations.
According to the I-T department gross export earnings from providing technical services were not eligible for tax exemption but only the net export earnings after deduction of expenses incurred in foreign exchange, such as salaries paid to these employees, under Section 80HHE.
