I-T Dept slaps Rs 450 cr demand on Infosys

New Delhi, Feb 25 (PTI) The Income Tax Department hasslapped a tax demand of over Rs 450 crore on software giantInfosys Technologies for wrongfully claiming tax exemption ononshore services by declaring them as software exports,Parliament was informed today.

Onshore software development is the practice whereinIndian companies send their software engineers on shortassignments (3-6 months) to companies based in Europe, the US,and other nations.

"A notice has been issued to Infosys.. for the assessmentyear 2007-08 as demand of Rs 657.81 crore was created... whichwas revised to Rs 456.38 crore in a rectification order,"Minister of State for Finance S S Palanimanickam said in awritten reply to the Lok Sabha.

He further said, "Revenue from software developmentactivity and technical manpower deputed abroad have not beenconsidered as export income eligible for deduction under10A/10B/10AA of the Income Tax Act, 1961."

The sections pertain to tax-free income arising out ofexports.

However, he added that the company has claimed therevenues generated from onshore software developmentactivities and deputation of technical manpower abroad asrelated to business activities conducted out of its SoftwareTechnology Park and Special Economic Zone units in India andeligible for income tax deduction.