The Hindu Business Line : IT cos make higher provisions for taxes

This is because they increasingly have to cough up tax for their on-site operations abroad and also on `other income' generated through invested surplus cash.

Interestingly, even though tax expenses in absolute terms have risen, tax as a percentage of profit before tax has come down for most companies. In the second quarter of the current financial year, most companies, with the exception of Wipro Ltd, had stepped up their tax provisions.

Infosys Technologies saw its tax liability rising 31 per cent from Rs 60 crore to Rs 78.5 crore even as its profit before tax rose 48 per cent from Rs 360 crore to Rs 533 crore in the quarter-ended September 30, 2004 as compared with the same period last year.

Similarly, in the first half of 2004-05, the company's tax payments increased 28 per cent from Rs 112 crore to Rs 143 crore.

Satyam's tax liability rose 8.4 per cent during the July-September 2004 quarter, rising from Rs 28 crore to Rs 30.35 crore.

In the six-month period, the increase was much steeper at 20 per cent and the tax outgo increased from Rs 50 crore to Rs 60 crore.

Wipro logged a profit before tax of Rs 481 crore, out of which a major share (Rs 413 crore) came from its global IT services and products division and Rs 16 crore came from other income and interest.

The company, however, showed a negative tax provisioning of Rs 70 crore during the second quarter of 2003-04.

Even a mid-sized company such as MphasiS saw its tax provisions rising sharply from Rs 2.7 crore in the first half of 2003-04 to Rs 6.1 crore in the first half of the current year.

Viewed in terms of the July-September quarter, there is a decline as can be seen in the accompanying table.

MphasiS' Chief Executive Officer, Mr Ravi Ramu, attributed the decline to deferred tax credits arising out of the company's US operations.

According to Mr Bhupinder Ahuja, an independent money manager, the increase in the tax payments can be attributed to scaling up of on-site operations and investments made by the companies, which, in turn yield profits that are taxable.

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IT cos make higher provisions for taxes

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