A new controversy has been raked up after the Income-tax department issued a scrutiny notice to Wipro regarding ‘bodyshopping’. (News report available here)
Bodyshopping refers to a situation where an Indian IT Company sends its software engineers for short assignments abroad. The payment for the services of the professionals are paid directly to the company and the salary is paid to the professional by the Indian IT Company.
The Indian IT Companies do not pay tax/pay a very limited amount of tax on the income thus derived from the foreign companies as they claim exemption u/s 10A of the Income-tax Act, 1961 (“export of articles or things or computer software”).
Now the question before the relevant authorities/courts would be whether this export is actually an export of computer software or export of manpower.
Secondly, the authorities/courts would also have to examine whether the work done ‘onshore’ i.e. outside India, would qualify for the exemption.
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