Wipro deposits Rs.240 mn in tax case on court order

Wednesday, December 29, 2010

BANGALORE - IT bellwether Wipro Limited Wednesday deposited Rs.24 crore (Rs.240 million) with the state commercial tax department in compliance with a Karnataka High Court directive, a company official said.

We have deposited the amount (Rs.240 million) as directed by the court Tuesday but we look forward to an early solution to the issue of double taxation on goods and services, Wipro Senior Vice President (taxation) P.V. Srinivasan told IANS here.

The global software major is of the view that when it is paying 10.3 percent towards service tax on the export of goods and services, levying an additional four percent as value added tax (VAT) by the state commercial department on the same transaction amounts to double taxation.

As the case is sub-judice, we will not go into its legal aspects but we hope to resolve the matter with the central and state tax authorities soon. As a law abiding company, we have complied with the court’s order, though it was interim in nature, Srinivasan asserted.

In a similar case earlier, the Supreme Court ruled that levying service tax and VAT on goods and services was mutually exclusive.

It is a matter of interpreting the taxation laws and their application. In our view, to pay on selling goods and services towards service tax and VAT is to be taxed twice, Srinivasan pointed out.

As the company did not comply with the court’s order of Dec 10, the vacation bench comprising Justice Venugopala Gowda and Justice B.V. Pinto Tuesday declined to hear its appeal for a stay on payment of VAT on re-export of software, which is treated as sale of goods by the state commercial tax department.

In the earlier order, a single judge of the court directed the export division of Wipro to pay 50 percent of the VAT and file an appeal before the appellate authority for commercial taxes by Dec 24 for exemption.

When the company failed to pay the amount and appeal within the fortnight, the commercial tax department attached its bank accounts and moved the high court against it.

Wipro sought tax relief on software it developed for other vendors, which in turn exported to it.

The company failed to submit the statutory H-form to the department for claiming tax exemption, a tax official said.

Wipro challenged the department for levying VAT on the software and sought exemption as it was paying service tax under the Development of Software Act and approached the court for quashing the department’s notice Oct 26.

Rejecting the company’s appeal, the department contended before the high court that the sale of software amounted to sale of goods and cited a Supreme Court ruling in 2006 in a similar case between the central government and Tata Consultancy Services, the country’s largest IT bellwether.

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