Modifying its earlier order, the Karnataka High Court, on Monday, directed IBM India Pvt. Ltd. to deposit 50 per cent of Rs.1,090 crore, the total tax demanded by the Income Tax Department for assessment year 2008-09 , on or before March 31.
The High Court, in its interim order of January 29, had stayed the interim order of the I-T Appellate Tribunal, which had asked the company to deposit only Rs.50 crore while accepting for consideration an appeal filed by the company, challenging the demand for payment of Rs.1,090 crore as tax.
The January 29 order of the High Court had given free hand for the Department to initiate proceedings to recover the entire amount of the demanded tax. Following this, the company had moved the High Court seeking vacating of this order.
After hearing the company’s plea, a Division Bench, comprising Justice D. V. Shylendra Kumar and Justice B. Sreenivase Gowda, has modified the blanket stay against the Tribunal’s order as the company agreed to make 50 per cent of the total tax due to the Department by March 31.
Meanwhile, it was pointed out to the Court that the company, besides depositing Rs.50 crore as directed by the Tribunal, had also paid another Rs.175 crore after the High Court passed the interim order.
It was also submitted by company’s counsel that another Rs.25 crore would be deposited by February 10 and the remaining amount would be deposited by March 31. Following this assurance given by the company, the Bench said that it would not insist on the company to provide bank guarantees for the remaining 50 per cent of the total tax amount though it was a practice usually followed while staying the tax demanded by the revenue authorities.
Meanwhile, the Court gave the Tribunal liberty to adjudicate the matter expeditiously.
The Department had demanded the tax after rejecting the IBM’s claim for deduction of income earned by exporting software through the Software Technology Park under Section 10A of the Income-Tax Act; and from export of software from its Special Economic Zone under Section 10AA of the Act for assessment year 2008-09.
Total tax demanded under these two provisions alone stood around Rs.560 crore.