Subex, the Indian business assurance vendor, received bad news when the Karnataka High Court upheld a decision to remove tax exemptions previously given to businesses operating in the country’s Special Economic Zones (SEZs). The court dismissed Subex’s petition in the process of making its judgement. For more, see here. The effect of the tax change is reported to be the…

…imposition of 18.5 per cent minimum alternate tax (MAT) on the book profits of SEZ units with effect from April 1, 2011, besides imposing dividend distribution tax with effect from June 1, 2011.

Indian business taxes are fiendishly complicated, and the interpretation and application of Indian tax law is notoriously unpredictable, as has been highlighted by a string major tax cases, including cases that involved telecoms giants Vodafone and Nokia. An earlier survey showed the imposition of MAT on SEZs has made India less attractive as an investment destination. This ruling adds to Subex’s tax woes, who are separately disputing demands for USD6.6mn in back taxes and related penalties.

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