Infosys faces $106 million fresh tax demand

Infotech Lead India: The Income Tax department has slapped a fresh $106 million tax demand notice on Infosys for 2009 fiscal.

Infosys is already contesting additional income tax demands of $214 million for four fiscal years beginning 2005. The software exporter will take legal recourse against the fresh tax demand notice as well.

“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 USD 106 million,” said Infosys in a filing to the US Securities and Exchange Commission (SEC) last week.

Infosys said that 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 totaling $214 million, including interest of $62 million upon completion of their tax review for fiscal 2005, fiscal 2006, fiscal 2007 and fiscal 2008.

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, PTI reported.

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.

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

Infosys says 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 advisors, 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.

On taxes in India, Infosys said in the filing that 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.

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