Big
victory for Wipro, Karnataka HC grants Foreign Tax Credit to tax holiday
entities
IT major Wipro has won a legal
victory with the Karnataka High Court allowing it to save a significant amount
in taxes from its overseas operations.
The judgment is likely to have
an impact on Indian companies that have overseas operations.
US taxes
In a ruling on Thursday, the
High Court said Wipro can take credit for taxes it paid in the US out of
revenues it earned from its operations there. Earlier, Wipro was denied tax
credit since the Indian operations came under the tax holiday ambit.
The issue relates to Wipro's
operations in the US, and the taxes it has paid — both at the state and Federal
levels, which comes under the ambit of foreign tax credits. According to Amit
Maheshwari, Partner, Ashok Maheshwary & Associates, Wipro did not get this tax
credit and appealed to the Karnataka High Court, since it would amount to
double taxation. Wipro also enjoyed tax holiday status in India at the time.
While the
income under consideration could not be ascertained, Wipro had filed the income
for the assessment year 2007-08. Further, it disputed the total income computed
and the total tax computed. When contacted, Wipro officials did not comment as
they have not yet received the formal order. Industry watchers believe this is
an important development. According to Maheshwari, this is a significant
judgment when it comes to the principle of foreign tax credits and sets a
precedent.
Finance Bill,2015
Section 295 is amended to provide for the power to the Board
to make rules for the purpose of granting relief for deduction of foreign taxes paid in other countries.
This amendment is effective from 1st
June, 2015
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