Deep trouble: Taxmen haunt weakened IT majors

By siliconindia   |   Wednesday, 07 April 2004, 19:30 IST
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NEW DELHI: Already debilitated by an appreciating rupee, Indian IT companies are now facing the wrath of the tax authorities. The income-tax department has sent notices to more than 20 companies including TCS, Wipro and IBM, denying them tax benefits under Section 10A & 10B of the Income Tax Act, reports an Indian daily, Hindustan Times. Industry sources said the tax authorities have raised demands of additional tax on the grounds that some of their expansions are not eligible for tax benefits under section 10 A as they are not separate undertakings. The I-T department has claimed Rs 261.4 crore from Wipro and Rs 22 crore from IBM. The sources added that an IT industry delegation led by NASSCOM president Kiran Karnik met senior finance ministry officials. The government has assured that the issue will be resolved soon. The income-tax department is of the opinion that the 10-year tax holiday under section 10A will be effective from 1992 onwards, irrespective of the year in which the expanded unit started operations. The companies say each unit is being treated as a separate undertaking and therefore tax holiday of 10 years should be applicable from the date of inception of commercial operations. The tax authorities said the expanded units have to be registered separately to be considered as separate entities. Former Ernst &Young chairman K.N. Memani said there was no confusion. Under section 10A. The same licence given to a company is valid if it maintains a separate identity for new units. “If a company has embarked upon an expansion programme and set up new units in a software technology park, such units will also enjoy 10 year exemption from the date the undertaking starts commercial functioning. The assessment order handed over to Tata Sons for TCS has not specified the amount, but says the exemption cannot be continued for some units. The sources said more than 15 companies in Bangalore have received notices under the same clause. There is no confusion over the government’s intent of giving tax holidays under section 10 A and 10 B, said Kiran Karnik. Some of the officers have interpreted the particular clause in a different way and have raised demands, he added. A blow-by-blow account 20 companies including TCS, Wipro and IBM get income-tax demands Taxmen say some expansions are not eligible for tax benefits as they are not separate undertakings IT delegation led by Kiran Karnik meets senior finance ministry officials Officials ensure speedy solution

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