Tribunal strikes down R400-crore tax demand on Microsoft India

The CESTAT ruling on September 23 said that marketing and technical support services given to overseas entities could be treated as “export of services” although these services are actually performed within India and involved market research on Indian consumers. It is an established policy that exports are not taxable.

Although the Microsoft case involves services rendered by the Indian firm to one of its overseas associates, the tribunal ruling is applicable to all Indian firms providing services to foreign entities. Tax experts said that the development has a favourable impact on IT and ITeS companies, apart from export-oriented units and certain Indian telecom group companies having a presence abroad. The tribunal ruling strikes down the revenue authorities’ view that for business auxiliary service provided by an Indian entity to be an export of service, it necessarily has to be ‘used’ outside India.

For Microsoft India, which had a July 2005 agreement with Microsoft Operations of Singapore for product support and marketing services in India, the ruling invalidates a Rs 400-crore tax demand slapped on it in 2008.

Bombay HC gives more relief to Vodafone India

The Bombay High Court on Monday set aside an addition of Rs 3,434 crore to the taxable income of Vodafone India by the income tax department for a tranche of shares issued by it to its parent abroad in January 2010. The addition to the income, about a third of which would have been the additional tax burden for that year without interest or penalty, was made by the taxman accusing the telecom giant of violating transfer pricing regulations by underpricing the shares it had issued to its parent, Vodafone Plc, in a rights issue. The HC adjourned hearing on a similar case involving Shell India to November 18.  (FE)