First Infosys, now iGate faces Rs. 738 crore tax demand

BANGALORE, INDIA: Last week, it was now former chief executive officer, Phaneesh Murthy's exit, which led to a steep fall of its stock prices. Now, it is learnt that iGate is bearing the brunt of a tax demand to the tune of $132.7 million (about Rs. 738 crore) for assessment years 2004-05 to 2009-10.

In May, BPO service provider, WNS, and IT major, Infosys Limited, faced tax demands of Rs. 557 crore and $106 million (about Rs. 582 crore), respectively.

Asserting that these demands are untenable, iGate has approached the requisite appellate authorities, suggest reports. "As of March 31, 2013, the company has open tax demands of $132.7 million for relevant assessment years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10," the firm said in a filing to US Securities and Exchange Commission (SEC).

"The assessment order demand is raised mainly on account of disallowance of certain benefits under section 10A of the Indian Income Tax Act and transfer pricing adjustment on account of interest on delayed recoveries from associated enterprises," the filing added.

"Majority of the unsettled tax demand for the mentioned period is mainly on account of disallowance of Section 10A benefits of the Indian Income Tax Act. Management considers these demands as not tenable and the matter is pending at various levels of appeal," an iGate spokesperson was quoted saying.

Last week, the Income Tax department issued a fresh $106 million (about Rs. 582 crore) tax demand notice on Infosys, for 2009 fiscal. As it is, the company is contesting additional Income Tax demands of $214 million (about Rs. 1,175 crore) for four fiscals years from 2005 and said it will take legal recourse against the fresh tax demand notice as well.

"The company has received the assessment order from the Income tax authorities for fiscal 2009 on May 2, 2013 along with a demand order for an amount of $106 million," Infosys said in a filing to the US SEC last week.

"As the company is contesting this position like earlier years, the appellate authority would be approached within the time limit prescribed under the relevant law."

Earlier this month, WNS faced tax demands on transfer pricing issue. It was about Rs. 557 crore on income with regard to acquisition of UK-based Aviva's BPO services. The tax demands, which include taxes on income and services, are for financial years 2003 to 2010, WNS had said in its annual report for 2012-13 given to the US SEC. The company, however, has challenged the income-tax notices in courts of law.