Top IT firms under DRI scanner for duty evasion

Top IT firms under DRI scanner for duty evasion

New Delhi/Mumbai: Top IT companies like Tata Consultancy Services, HCL Infosystems Ltd and some distributors of Microsoft are under the DRI scanner for alleged duty evasion to the tune of more than Rs100 crore.

Sources in the Directorate of Revenue Intelligence (DRI) said that the firms are under probe for allegedly importing software from Microsoft Singapore Pte. Ltd (part of the Microsoft group) between 2005-2007 without declaring the complete value of the imports, thereby “evading duty" for which notices would be issued soon.

Top sources in the agency said that the “evasion" amounted to import of CDs and DVDs during the period for which they had allegedly not declared the licence fee as stipulated by the country’s laws.

“As per our law, the license fees are also liable for duty which has to be added to the import cost but during our checks we found that certain companies had not done so," a senior DRI official, who didn’t wish to be identified said.

Sources said that the agency had started its investigations in middle of June and had even arrested Sunil Dalal, Managing Director of Softcell Technologies, a Mumbai-based software company and also a distributor of Microsoft in India as part of its investigations.

A few officials of Microsoft Corporation (India) Pvt Ltd among others were reportedly questioned by the agency, sources said.

When contacted, a spokesperson for Microsoft said that the company does no have “any comments to give" about the ongoing investigations.

A TCS spokesperson, however, said, "there is some inquiry going on with regard to import of Microsoft software in India. We have been advised by our legal advisers that there have been no irregularities committed in respect to such import".

An HCL spokesperson said “We have received some queries and we are cooperating with the agency. We do our business with utmost integrity and as per law".

Other companies believed to have been under the probe include CMC Ltd, Wipro Technologies, Redington India Ltd and Ingram Micro Inc.

Earlier in April this year, Microsoft had been asked by the Income Tax Department to pay about Rs700 crore as income tax including interest on the royalty income generated from its softwares in India, which are marketed through licensing to customers.

In September, the service tax department had charged the Indian arm of Microsoft with evading taxes to the tune of Rs128 crore during 2006-07 and had asked it to pay Rs256 crore, including penalty.

The department claimed to have found that Microsoft India’s Gurgaon unit carried out marketing activities for its India operations and not for the Singapore unit as it had claimed in its reply to a show cause notice served by the department earlier.