I-T Department asks Infosys to pay Rs 450 crore for onshore activity

I-T Department asks Infosys to pay Rs 450 crore for onshore activityThe Income Tax Department has accused India's third largest software giant Infosys of profiting from an unlawful tax exemption. I-T Department now wants Infosys to pay Rs 450 crore for its software development projects. Income Tax Department revealed that Infosys has benefited with a falsified filing of return.

According to I-T Department, Infosys Technologies depicted onshore software projects as software exports in its audit. This lead to extra tax benefit for Infosys under export laws. However, Infosys sources said that company sends its engineers to work on projects for shorts durations, so it should be considered as software exports. Onshore software development is the practice widely adopted by software companies in India to send its employees abroad to work from company locations. But as per 10A/10B/10AA of Income Tax Act,1961, manpower deputed abroad for work are not considered eligible for tax deduction. About the issue, Minister of State for Finance S. S. Palanimanickam said in a written reply in Parliament "A notice has been issued to Infosys.. for the assessment year 2007-08 as demand of Rs 657.81 crore was created... which was revised to Rs 456.38 crore in a rectification order."

Palanimanickam further added that company has claimed this tax exemption because those deputation of technical manpower for business activities was conducted out of its Software Technology Park and Special Economic Zone units in India. Hence company is eligible for tax deduction.