India seeks $866.2 million in taxes from IBM: What's in India's three-way payments

The Indian tax authorities have issued a notice to IBM asking the company to pay about $866.2 million as back taxes for the 2009 fiscal year.

An IBM spokeswoman issued a statement confirming receipt of the tax notice, but declined to disclose the exact amount of the tax liability.

Citing Indian tax officials, local media reported that IBM's subsidiary in India failed to accurately report its income for the 2009 fiscal year. As a result, the Indian tax authorities have demanded payment of this outstanding tax.

A spokesperson for India-based IBM said, "IBM will not comply with the demands of the Indian tax authorities and will pursue appropriate legal avenues to assert its rights."

Officials from the Indian tax department are yet to comment on the matter.

However, according to reports in the Indian media, this notice that IBM has received so far is only a draft assessment and the company still has the right to appeal to the relevant authorities. Further, in IBM's latest filing with the US Securities and Exchange Commission (SEC), the company said it had made an advance payment of $394 million in income tax to India as of 30 September 2013.IBM noted that one of the purposes of this advance payment was to preserve its right to file an appeal against the tax dispute.

In fact, IBM is not the only company facing tax recovery from Indian tax authorities. India is also reportedly recovering unpaid taxes from a number of multinational companies, including Royal Dutch Shell and British telecoms company Vodafone.