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.

US taxes

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.

While the income under consideration could not be ascertained, Wipro had filed the income for the assessment year 2007-08. Further, it disputed the total income computed and the total tax computed. When contacted, Wipro officials did not comment as they have not yet received the formal order. Industry watchers believe this is an important development. According to Maheshwari, this is a significant judgment when it comes to the principle of foreign tax credits and sets a precedent.

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