IBM India to move court against I-T department's Rs 5357 crore tax notice

BANGALORE: The Indian arm of IBM said it will seek legal recourse after Indian income tax authorities issued a tax demand of a little over Rs 5,300 crore.

The tax department is alleging that IBM under-reported export revenues that the American company earned in the 2008-09 financial year from its facilities located in tax-exempt zones.

IBM is not alone in receiving such tax notices. Other large Indian IT services companies such as Infosys, Wipro and WNS have also disputed such demand. “IBM has taken this tax dispute for judicial recourse,” an IBM India spokeswoman wrote in an emailed statement.

“Fundamental to IBM’s culture and business model is that we act with integrity wherever we do business.” Information technology services companies in India have enjoyed tax exemption on the profits earned from export of software and related services.

To avail those benefits, the export facilities had to be located in the so-called Software Technology Parks of India that were set up in different parts of the country. However, due to differences in the way rule was interpreted and the lack of clear definitions, there have been several disputes between the industry and the tax department, which has on many occasions denied the exemptions claimed by the IT companies.

Second-ranked Infosys, thirdlargest software company Wipro, iGate and WNS have all appealed similar tax demands running into thousands of crore, for the past several years.