Bangalore: International Business Machines Corp. (IBM), the world’s largest technology services firm, said on Friday that it was contesting a tax notice of Rs5,357 crore ($865 million) sent to its Indian unit by the income tax department, which accused the company of under-reporting profit for the 2009 fiscal year.

“Fundamental to IBM’s culture and business model is that we act with integrity wherever we do business. We have demonstrated our commitment to integrity since we began operations in India. IBM has taken this tax dispute for judicial recourse," an IBM spokeswoman said in an email response.

On Friday, DNA newspaper reported that the I-T department had slapped a notice on IBM India, alleging that the company had evaded tax under the export promotion scheme of the Software Technology Parks of India (STPI).

The notice alleges that IBM under-reported profit for the fiscal year ended March 2009, reporting only 20-30% of what it earned in total, the report said.

Under STPI rules, IT firms doing business in India can avail of income tax benefits for exporting software.

The latest development comes months after Mint first reported in July that IBM had sacked some two dozen employees in India for overstating revenue by at least $8 million from different customer accounts to meet financial targets.

That dated back to 2011-2012 and involved staff working in IBM India’s software services division, the report said citing people familiar with the development, who requested anonymity.

Over the last decade, IBM has built up a local workforce of over 150,000 in India, generating close to $3 billion in revenue, according to industry estimates. IBM does not disclose a region-wise breakup of revenue.

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