in a Dynamic Environment - Domain-b

Annual Report 2008-09fiscal 2008). The decrease in depreciation of 0.65% as apercentage of revenues is primarily the net impact of: lower depreciation for computers in current fiscalof 0.89% on account of a revision in the originalestimate of the useful life of computers from twoto four years higher depreciation of 0.27% on additionalinfrastructural facilities.Profit before taxes (PBT)The PBT in fiscal 2009 was Rs.5,139.69 crore (Rs.5003.86crore in fiscal 2008). As a percentage of revenues, thePBT decreased from 27.36% in fiscal 2008 to 22.94% infiscal 2009. The primary reason for the decrease in thePBT of 4.42% as a percentage of revenues is due to: decrease in PBIDT by 5.05% increase in PBT due to lower depreciation costs by0.65%.Provision for taxationIncome tax expenses comprise the current income taxand the net change in the deferred tax assets andliabilities in the applicable fiscal period from operationsin India and foreign tax jurisdictions. The Companybenefits in India from certain tax incentives under section10A of the Income Tax Act, 1961, for the IT servicesexported from designated ‘Software Technology Parks(STP)’. In addition, benefit from tax incentives applicableto Free Trade Zones are available to the Company inrespect of some of the units located in such zones. Thebenefits applicable to the Software Technology Parks(STPs) are due to expire by March 31, 2010.Minimum Alternative Tax (MAT) paid in accordance withthe tax laws, gives rise to tax credit which according tothe Income Tax Act 1961, can be carried forward forsubsequent seven years. Post tax-holiday period for STP,the Company would have sufficient tax liability to offsetthese tax credits. Accordingly, MAT is recognised as anasset in the balance sheet.Fringe benefit tax (FBT) is payable by the Company on thevalue of the benefits provided and/or deemed to beprovided to its employees.The tax expense (excluding FBT) decreased from Rs.470.45crore in fiscal 2008 to Rs.420.48 crore in fiscal 2009. Taxexpense represented 1.88% of revenues in fiscal 2009(2.57% in fiscal 2008). The reduction in tax expense isprimarily attributable to increase in the provision fordomestic taxes of Rs.0.80 crore and a reduction in theprovision for overseas taxes of Rs.50.77 crore.Domestic tax increase of Rs.0.80 crore is primarily onaccount of (a) lower current tax of Rs.23.10 croreattributable to incremental exchange loss and (b) higherdeferred tax expense of Rs.25.80 crore arising out ofimpact of change in the depreciation charge for STP/SEZunits, post-tax holiday period.Overseas taxes were lower by Rs.50.77 crore mainly dueto (a) refunds and reversals of taxes in overseas locationsof Rs.86.47 crore coupled with (b) net increase in taxprovisions for overseas jurisdictions of Rs.35.70 crore.The FBT was Rs.23.00 crore in fiscal 2009 (Rs.24.65 crorein fiscal 2008). As a percentage of revenues, the expensehas reduced to 0.10% in fiscal 2009 as compared to 0.13%in fiscal 2008.Net profitThe Company's net profit was Rs.4,696.21 crore in fiscal2009 (Rs.4,508.76 crore in fiscal 2008). Net profit marginas a percentage of revenues declined from 24.65% infiscal 2008 to 20.96% in fiscal 2009. The reduction of3.69% is attributable to: lower PBT of 4.42% reduction in taxes (including FBT) of 0.73%.68