Microsoft: We'll support India's proposed software tax

Software giant says it will abide by decision should Indian government choose to start taxing income from sales of packaged software in country, report says.

Software giant Microsoft says it will abide by Indian government's decision should the authorities decide to begin taxing income from the sales of packaged software in the country.

"Right now, Microsoft is just evaluating and analyzing these things and we don't have a firm view on it," Sanket Akerkar, managing director of Microsoft India, told The Economic Times Monday. "However, at the end of the day, tax is the law of the land and it's in our intention that we will comply with the law of the land."

When contacted, a Microsoft spokesperson told ZDNet Asia that India--should it proceed with the tax--would not be the first country in which revenues from the vendor's packaged software sales are taxed, but he gave no further details.

Asked how the impending decision might impact the software company's revenue figures in India and Asia-Pacific, he replied that as India's IT industry was still seeking clarification on the issue and its applicability, it was "too early to comment any further on the issue".

Akerkar's comment was in response to recent reports that companies which sell software in India, such as Microsoft, Hewlett-Packard, General Electric, Samsung and Sonata Software, could face an additional tax burden after the Indian government clarified tax provisions relating to the use of packaged software.

He said Microsoft was still analyzing the exact implications of the amendment, adding that it was "important" for the software vendor to support "what the government of India chooses to do".

According to a previous report by The Economic Times, several litigation cases battling against tax authorities that seek to tax income from sale of software as royalty, were pending in India's High Court and Supreme Court. Some courts had accepted the tax demands while others turned these down. Most, however, had held that such income should be regarded as business profit and not taxable unless the company had permanent establishment in India, the report said.

According to the Indian English daily, the issue was brought up during India's 2012 budget, and the Indian government sought to end the confusion by proposing a retrospective change in the explanation of the term "royalty" to specifically include computer software. This change would be made applicable from 1976 onward, and at least 15 companies facing tax claims related to the sale of software could be impacted, it added.