Microsoft India to pay 700 Crore Income Tax

Major Software Company Microsoft India has been asked to pay Rs 700 crore income tax, including penal interest for the financial year 1998-99 to 2003-04, by Commissioner of Income Tax (CIT), dealing in international taxation cases, in its recent judgment.

The question is whether Microsoft's revenue in India is from royalty on licensing the software to end-users or is it income from its India operations. Microsoft operates in India through Gracemac Corp.

However, the IT department contended that the company had licensed Microsoft (MS) software to end-users in India. The assessing officer of the department held that income received by the company from licensing of software in India was taxable as it is a royalty income. The officer had passed an order to tax about 35% to 40% of the total income of Rs 2,240 crore.

Other Software companies like Oracle are also soon to come under the scrutiny of IT Dept