Company advised demand not sustainable. |
Wipro Ltd will appeal against a Rs 261 crore tax demand under Section 10A of the Income Tax Act for the profit it earns out of units located in a software technology park in Bangalore. |
Companies registered with the Software Technology Parks of India (STPI) are exempt from income tax on export earnings. Based on this, these companies are allowed to expand such units. |
However, in Wipro's case, the tax assessment officer has held the company's expanded units in Bangalore are fresh entities, which need new licences. This demand has been served on Wipro for fiscal 2000-01. The Rs 261 crore tax demand is only Rs 13 crore less than Wipro's third quarter profit after tax of Rs 274 crore. |
According to tax analysts, Wipro has not taken unfair advantage and the assessment officer has taken "a very narrow view" of the issue. |
"This kind of demand can be made on companies if they set up a totally new entity or acquire a company, which is not the case here," an analyst said. |
Wipro said in a statement that it had been advised that the demand was not sustainable since neither was it consistent with judicial precedents nor was it in line with legislative intent. |