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Wipro under the scanner of Tax patrols for Body shopping
By siliconindia
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Monday, 23 May 2011, 23:27 IST
Bangalore: Yet another software giant is under the surveillance of the tax authorities. Wipro is been questioned by revenue authorities for its onshore contracts which is famously called as Body shopping. Although the authorities have not demanded any specific amount of tax they have sent an official notice to the company to provide details of the projects which were carried out the year of 2008-09.
Under Section 10A of the Income Tax Act, all software giants are claiming benefits for software export income but a tax official claimed that they were not exporting software, they were exporting manpower. After choking Infosys with a unanimous amount of Rs 450-crore tax, the income tex department targeted iGate with 
11 crore as tax.
In Infosys case, the I-T department argued that IT companies are sending their staff to work in overseas markets, including the U.S. and Europe. Under such arrangements, the foreign company pays the Indian firm for the services of each professional while the domestic company pays a daily allowance over and above the salary paid to them. Software firms currently pay no tax on this income, claiming deduction under Section 10A of the Income Tax Act.
The tax authorities said that such a practice is followed so that the IT giants can reduce the expenses incurred in foreign exchange to pay professionals sent abroad. A report by Susquehanna International Group reveled that in FY08, Infosys had an onshore income of $2.01 billion, for which the company was charged an incremental tax of 4.4 percent which sums up to $89 million. A similar kind of a calculation is done for Wipro as well which will reduce the EPS of Wipro to $0.41 from $0.47
11 crore as tax.
In Infosys case, the I-T department argued that IT companies are sending their staff to work in overseas markets, including the U.S. and Europe. Under such arrangements, the foreign company pays the Indian firm for the services of each professional while the domestic company pays a daily allowance over and above the salary paid to them. Software firms currently pay no tax on this income, claiming deduction under Section 10A of the Income Tax Act.
The tax authorities said that such a practice is followed so that the IT giants can reduce the expenses incurred in foreign exchange to pay professionals sent abroad. A report by Susquehanna International Group reveled that in FY08, Infosys had an onshore income of $2.01 billion, for which the company was charged an incremental tax of 4.4 percent which sums up to $89 million. A similar kind of a calculation is done for Wipro as well which will reduce the EPS of Wipro to $0.41 from $0.47