Tuesday, May 21, 2013

Microsoft India comes under I-T scanner

New Delhi: After Nokia and Royal Dutch Shell, the income tax department has sent a demand notice to software giant Microsoft’s Indian arm, which said it has challenged the same.

The IT department reportedly sent the notice to Microsoft seeking details of its income from Indian operations for four years beginning FY06. Details have been sought about income from work done at Microsoft’s Indian research and development sites on several softwares, which were marketed globally.

When reached for comments, Microsoft India said it has approached appellate forums for the resolution of the issue. “Microsoft complies with the tax laws in each jurisdiction in which we operate. We are seeking relief against the transfer pricing (TP) adjustments through the appropriate appellate forums,” it said.

The IT department notice reportedly does not quantify the amount of profits earned by its US-based parent Microsoft Corporation that are attributable to the work performed at its R&D centres in India. The company said: “Since the matter is sub judice, we are unable to provide further details or comments regarding the same. We are hopeful that the Rangachary Committee recommendations on R&D Centers and Safe Harbours will help facilitate resolutions to TP litigations in the IT industry.”

Last year, the government had set up a panel, headed by former Central Board of Direct Taxes chairman N Rangachary, to address issues like approach to taxation of development centres, tax treatment of ‘onsite services’ of domestic software firms and those related to finalizing Safe Harbour provisions. Safe Harbour principles are disclosure practices to check litigations in transfer pricing — an accounting mechanism undertaken by MNCs to reduce tax liabilities. Courtesy:

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