Infosys recently disclosed receiving a substantial tax demand of ₹341 Crore from the Income Tax Department for the assessment year 2020-21. This unexpected development has prompted the company to conduct a comprehensive assessment of its financial standing and operational strategies moving forward.
In response to this tax demand, Infosys has promptly initiated an evaluation process to determine the potential impact on its financial statements for the current quarter and fiscal year ending March 31. Additionally, the company is actively considering the option of filing an appeal against the tax demand, underscoring its commitment to ensuring fair and transparent tax compliance practices.
The tax demand, in accordance with Section 201 & 201(A) of the Income Tax Act of 1961, has prompted Infosys to meticulously analyze its financial position and explore potential avenues to address this challenge effectively. Moreover, a subsidiary of Infosys has been directed to refund ₹15 Crore for the 2014-15 assessment year, further complicating the financial landscape for the company.
Despite these challenges, Infosys is poised to receive a tax refund of ₹6,329 Crore alongside a tax liability of ₹2,763 Crore for assessment years spanning from 2007-08 to 2018-19, as per assessment orders. This presents both opportunities and challenges for the company, necessitating careful deliberation and strategic planning to navigate through this complex financial terrain.
As Infosys diligently assesses the impact of these tax-related developments on its financial statements for the current quarter and fiscal year, it remains steadfast in its commitment to transparency, compliance, and responsible corporate governance. Furthermore, the company is proactively addressing a tax liability, including interest, for the assessment year 2022-23, in contrast to a previous tax demand for the assessment year 2011-12, totaling ₹4 Crore, including interest.
Amidst these evolving circumstances, Infosys continues to uphold its core values and principles while striving to mitigate risks, optimize opportunities, and maintain its financial resilience in the face of challenging tax-related scenarios.
Sources Of information: IIFL SECURITIES
