Big victory for Wipro, Karnataka HC grants Foreign Tax Credit to tax holiday entities
IT major Wipro has won a legal victory with the Karnataka High Court allowing it to save a significant amount in taxes from its overseas operations.
The judgment is likely to have an impact on Indian companies that have overseas operations.
In a ruling on Thursday, the High Court said Wipro can take credit for taxes it paid in the US out of revenues it earned from its operations there. Earlier, Wipro was denied tax credit since the Indian operations came under the tax holiday ambit.
The issue relates to Wipro's operations in the US, and the taxes it has paid — both at the state and Federal levels, which comes under the ambit of foreign tax credits. According to Amit Maheshwari, Partner, Ashok Maheshwary & Associates, Wipro did not get this tax credit and appealed to the Karnataka High Court, since it would amount to double taxation. Wipro also enjoyed tax holiday status in India at the time.
Section 295 is amended to provide for the power to the Board to make rules for the purpose of granting relief for deduction of foreign taxes paid in other countries.