India's tax hunt claims Infosys, demands $105.3 million

Tech firms haven't had it easy in India. Vodafone, Google and Samsung have faced India's ire, and now Infosys is added to the list.
Written by Charlie Osborne, Contributing Writer

In India's latest round of tax demands hurled at tech firms, Infosys is expected to pay $105.3 million.

India's second-largest software services exporter, Infosys, is planning to appeal an income tax demand of 5.77 billion rupees ($105.3 million) set by Indian authorities, according to Reuters.

The demand has been made in relation to software development completed overseas — and therefore accounting for tax benefits which follow — in addition to revenue generated from "special economic zones in India," according to a company statement. The firm contends that the latest demand disregards tax clarification set by the Indian government in January.

Infosys is also contesting a number of similar tax demands made for the fiscal years from 2005 to 2009, according to a filing submitted to the U.S. Securities and Exchange Commission. The filing reads:

"The company has received demands from the Indian IT authorities for payments of additional taxes totalling USD 214 million, including interest of USD 62 million upon completion of their tax review for fiscal 2005, fiscal 2006, fiscal 2007 and fiscal 2008."

The software services exporter plans to appeal the demand.

Infosys is not the only company to fall foul of India's tax laws. Vodafone was first to sit up and take notice of India's changing tax legislation. In March 2012, the Indian government revealed plans to amend tax laws dating back to 1962, and in response, Vodafone considered setting aside capital for a $2.2 billion tax bill to mitigate potential legal risks.

Smart move, it seems, as Google India was next to receive a slap on the wrist and a $13.8 million fine from the income tax office for allegedly "misleading the department, underdeclaring its income, violating accounting rules and attempting to show wrong revenues." Google India denied the claims and has appealed. This year, the department has claimed that Samsung India owes 1.14 billion rupees ($207 million) in back taxes, and has demanded that Nokia pays out $383 million over tax evasion claims.

Indian authorities may be quick to issue demands, but the government may not be so agreeable to paying back funds from IT companies. According to reports, the Indian government owes at least $547.6 million in service tax refunds to IT firms alone, but for some companies, delays in receiving money have stretched as far as nine years.

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