Infosys responds back to tax allegations

BANGALORE, INDIA: In response to the recent allegation of tax evasion, Kris Gopalakrishnan, the CEO of Infosys wrote back to media, negating the charges raised my a newspaper report recently.

He wrote that Infosys is among the top tax payers in the software and BPO industry. “For the fiscal year 2010 our total advance tax payment is Rs. 1,180 crore.” Infosys did not claim any tax or duty benefit till its SEZ unit got approved by the Ministry of Commerce on June 16, 2006 and signing of the customs bond on July 10, 2006. Therefore there is no question of evasion of taxes and duties (direct and indirect) as reported in the press.”

The email stated, “This is a clarification regarding a news item that appeared on the front page of the Financial Express dated March 13, 2010 and titled “Infosys faces Evasion charges”. First of all, as one of the most respected and ethical Indian companies, Infosys has never in the past intended to evade taxes and never in the future will intend to evade taxes and duties. In fact, Infosys chairman – Mr. Narayana Murthy – has been the only business leader who has argued publicly for abolition of all tax exemptions to software and BPO companies.”

In the email Infosys asserted to have paid all customs and excise tax on the construction activities till it got the Letter of Approval from the Ministry of Commerce. It also claimed to be the first company to be invited by the Chandigarh administration to start a development center at Rajiv Gandhi Chandigarh Technology Park, being created as an SEZ.

The cumulative investment by Infosys in this facility as on December 31, 2009 is Rs. 286.85 crore. Since the start of operations of our Chandigarh Development Centre on September 4, 2006 till December 31, 2009, we have had exports of over Rs. 750.40 Crore. The exports for the last 12 months ending December 31, 2009 was Rs. 374.64 Crore. As of December 31, 2009 we had 2,676 employees at our Chandigarh Development Center. The only activity taken up in this development center is for export purposes.

The email further stated, “This is as per the 3.1.1 Guidelines of SEZ– issued by the Ministry of Commerce on January 21, 2002. Government of India gave the formal approval for the RGCTP to operate as a SEZ on June 6, 2005. As the RGCTP SEZ did not start functioning before the new SEZ act & rule set came in to force on February 10, 2006 the Board of Approval (BOA) of the Government of India (GOI), after consideration of all the facts put forward by the Chandigarh Administration, accorded the approval of RGCTP SEZ on May 19, 2006. Infosys received the approval for setting up an IT SEZ unit in RGCTP from the Government of India on June 16, 2006.”

The Infosys statement claimed that no land has been sold to it by the Chandigarh Administration on freehold basis.

"Infosys signed the land lease agreement as per the provisions of SEZ Rules on April 3, 2009. The company has not carried out, as alleged by FE, a series of complex buying and lease deals with the Chandigarh Administration in order to buttress the legality of its SEZ status.”

On march 13, Financial Express had reported that Infosys Technologies could face a tax liability of Rs 100 crore for violating special economic zone (SEZ) rules at its Chandigarh SEZ.