Information technology major Patni Computer Systems on Thursday said its earnings for a financial period could be affected as the Income Tax Department has denied any tax concession to the company and has asked it to shell out Rs 63.01 crore (Rs 630 million).
The company has received an assessment order and a tax demand notice from the Income Tax Department disallowing a taxable income deduction made by the company pertaining to its development units located in the Software Technology Parks of India for the year ended March 31, 2004.
The deductions were made under Section 10(A) of the Income Tax Act, which provides a ten-year tax holiday for setting up software development units in STPI.
Meanwhile, the company said it would file an appeal challenging the assessment order before the first appellate authority under the Indian tax laws.
"If the company fails to prevail in its appeal, or any subsequent appeals, in any reporting period, the company's financial results for such reporting period could be materially adversely affected," Patni said in a filing on the Bombay Stock Exchange.
Tax deductions were denied, as such benefits are inapplicable, since Patni is already in the 'same business' as the new units. The order claims that Section 10(A) benefits are available only for 'new businesses' and that the same business in new undertakings shall not qualify for such benefits.
Accordingly, the company has to make a payment of Rs 63.01 crore (inclusive of interest).
The shares of the company closed at Rs 410.65, down 0.79 per cent on the Bombay Stock Excahnge.
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