Nasscom urges Centre to intervene in double-taxation issue with Australia

Australian court had ruled that payments received by Indian IT firm Tech Mahindra should be treated as 'royalty' and taxed

IT industry body Nasscom has sought the intervention of Indian government to resolve the concerns about double taxation in Australia. The representatives of the trade body are meeting Indian government officials to appraise them about the issue following the verdict of an Australian court, which said that payments received by Indian IT firm Tech Mahindra should be treated as ‘royalty’ and taxed.

This translates into a small percentage of tax on Tech Mahindra's offshore income derived from Australian clients while the company is already paying taxes on income from Australian units. Most Indian IT services companies have a sizable client base in Australia.

“While the tax component is barely a few millions, it seems to be an issue that can have a larger impact on the Industry as a whole, given the nature of IT services. So we believe, industry bodies are also keen on resolving the issue,” industry sources said.

Tech Mahindra put forth the argument that while Australia has the right to tax royalties in line with the bilateral treaty, it is superseded by local laws on such taxes. The court rejected the argument that Australia’s domestic law does not give the right to tax such amounts under its local laws.