Shock to Software Industry - Software Exports - Infosys Stuck with 400 Crore IT Demand
EVEN President Obama is scared of Bangalore, as it is taking away American jobs. The Indian Software Industry is our pride and is a global leader. But a recent demand of about Rs . 400 Crores by the Income Tax Department has shaken the Software Industry. The demand pertains to income generated by Infosys employees working at clients' sites abroad. Software exporters have to invariably post employees abroad as clients ask for on-site staff to coordinate and provide technical support. But the Income Tax Department does not consider this as an eligible deduction under Section 10A / 10B and slapped the demand on Infosys.
This is sure to lead to protracted litigation as demands to other Software giants will only be a matter of time.
But Infosys and others are on a strong wicket as a little known software company has already won the battle for them in the ITAT.
In the case of Meridian Enterprises Computing Solutions P Ltd - 2010-TIOL-132-ITAT-MUM, the ITAT had held in similar circumstances that the assessee is entitled for deduction u/s 10A / 10B of the Act. In this case, the Company had only one employee and they actually hired professionals for the onsite work.
Maybe CBDT should take a decision on this issue before it snowballs into a major litigation in every bench of the Tribunal.