Relief for tech firms as govt sheathes tax sword
The clarifications come ahead of finance minister P Chidambaram's visit to Hong Kong and Singapore to attract investments. Chidambaram is scheduled to leave on the two-nation tour on the night of January 21. He is also expected to visit Germany and the UK later in the month.
CBDT chairperson Poonam Kishore Saxena said: “These clarifications will address the disputes or concerns of software industry arising out of interpretation of existing provisions of tax structure in the IT Act (with respect to Sections 10A, 10AA and 10B).”
These clarifications, Saxena said, follow the recommendations of the N Rangachary committee constituted by the Prime Minister last year. They should lead to a reduction in disputes between the information technology industry and the income tax department.
Onshore software development is the practice wherein Indian companies send their software engineers on short assignments (3-6 months) to overseas companies. Doubts have been raised on whether units taking up such production of software at the client’s premises would be eligible for the tax holiday.
The government had contended revenue from software development activity and technical manpower deputed abroad are not considered as export income eligible for deduction under 10A/10B/10AA of the Income-Tax Act, 1961.
The government had said that Infosys had claimed the revenues generated from onshore software development activities and deputation of technical manpower abroad as related
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