Tax Assessment Overview

IT services company Coforge Limited has been issued a tax demand totaling ₹184.98 crore by the Income Tax Department. This demand, which results from a transfer pricing adjustment, centers on the profit margins reported for the financial year 2021-22.

Details of the Tax Demand

The Income Tax authorities contend that Coforge should have declared a profit margin of 32.5%, a significant increase from the 11.6% reported by the company. As part of this assessment, the demand also includes an additional interest liability amounting to ₹48.46 crore.

Coforge’s Response

In response to the tax department’s claim, Coforge has firmly rejected the allegations, insisting that their profit margins, even at a consolidated group level, do not support the calculations put forth by the tax authorities. The company expresses confidence that this tax matter will be resolved without causing substantial financial impact.

As part of their strategy to contest the demand, Coforge is collaborating with tax advisors to prepare a challenge against the assertion made by the Income Tax Department.

Conclusion

This ongoing case highlights the complexities surrounding transfer pricing and corporate taxation in India, underscoring the challenges businesses face in adhering to evolving tax regulations.