24.2.8. Income taxes

The provision for taxation includes tax liabilities in India on the Company's global income as reduced by exempt incomes and any tax liabilities arising overseas on income sourced from those countries. Infosys' operations are conducted through STPs and SEZs. Income from STPs is tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or March 31, 2011. Income from SEZs is fully tax exempt for the first five years, 50% exempt for the next five years and 50% exempt for another five years subject to fulfilling certain conditions. For fiscal 2008 and 2009, the Company had calculated its tax liability under MAT. The MAT credit can be carried forward and set off against the future tax payable. In the current year, the Company has calculated its tax liability under normal provisions of the Income Tax Act and utilized the brought forward MAT Credit.

As at March 31, 2010, the Company has provided for branch profit tax of Rs. 232 crore for its overseas branches, as the Company estimates that these branch profits would be distributed in the foreseeable future. Further, the tax provision for the year ended March 31, 2010 includes a net tax reversal of Rs. 316 crore relating to SEZ units, for provisions no longer required.

24.2.9. Loans and advances

in Rs. crore
Particulars
As at March 31,
  2010 2009
Deposits with financial institutions :    
HDFC Limited(1) 1,551 1,298
Sundaram BNP Paribas Home Finance Limited 4
Life Insurance Corporation of India 337 253
  1,892 1,551
(1) Deepak M. Satwalekar, Director, is also a director of HDFC Limited. Except as director in this financial institution, he has no direct interest in any transactions.

Deposit with LIC of India represents amount deposited to settle employee-related obligations as and when they arise during the normal course of business

Refer to Note 24.2.21.b.

24.2.10. Fixed assets

Profit / loss on disposal of fixed assets during the year ended March 31, 2010 was Rs. 2 crore. For the year ended March 31, 2009, the profit / loss on disposal of fixed assets is less than Rs. 1 crore and accordingly disclosed in Note 24.3.

The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the Company has the option to purchase the properties on expiry of the lease period. The Company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as ‘Land – leasehold’ under ‘Fixed assets’ in the financial statements. Additionally, certain land has been purchased for which the Company has possession certificate for which sale deeds are yet to be executed as at March 31, 2010.

24.2.11. Details of investments

The details of investments in and disposal of securities for the years ended March 31, 2010 and March 31, 2009 are as follows :

in Rs. crore
Particulars
Year ended March 31,
  2010 2009
Investment in securities    
Long-term investments(1) 2
Certificates of deposit 1,180 193
Liquid mutual fund units 9,901 866
  11,081 1,061
Redemption / disposal of investment in securities    
Long-term investments 5
Liquid mutual fund units 7,383 939
Certificates of deposit(2) 200
  7,388 1,139
Net movement in investment 3,693 (78)
(1) During the year ended March 31, 2009, Infosys received 2,420 shares of Mera Sport Technologies Private Limited valued at Rs. 2 crore in lieu of provision of usage rights to the software developed by Infosys. The investment was fully provided for during the year ended March 31, 2009 based on diminution other than temporary.
(2) Represents redemption value inclusive of Rs. 7 crore interest


24.2.12. Holding of Infosys in its subsidiaries

Name of the subsidiary Country of incorporation
As at March 31,
    2010 2009
Infosys BPO India 99.98% 99.98%
Infosys Australia Australia 100% 100%
Infosys China China 100% 100%
Infosys Consulting(1) USA 100% 100%
Infosys Mexico(2) Mexico 100% 100%
Infosys Sweden(3) Sweden 100%
Infosys Brazil(4) Brazil 100%
Infosys Public Services Inc(5) USA 100%
Infosys BPO s.r.o.(6) Czech Republic 99.98% 99.98%
Infosys BPO (Poland) Sp.Z.o.o(6) Poland 99.98% 99.98%
Infosys BPO (Thailand) Limited(6) Thailand 99.98% 99.98%
Mainstream Software Pty Limited(7) Australia 100% 100%
Infosys Consulting India Limited(8) India 100%
McCamish Systems LLC(9) USA 99.98%
(1) During the year ended March 31, 2010 the Company made an additional investment of Rs. 50 crore (US $10 million) in Infosys Consulting, which is a wholly owned subsidiary. As of March 31, 2010 and March 31, 2009, the Company has invested an aggregate of Rs. 243 crore (US $55 million) and Rs. 193 crore (US $45 million), respectively in the subsidiary.
(2) During the year ended March 31, 2010 the Company made an additional investment of Rs. 18 crore (Mexican Peso 50 million) in Infosys Mexico, which is a wholly owned subsidiary. As of March 31, 2010 and March 31, 2009 the Company has invested an aggregate of Rs. 40 crore (Mexican Peso 110 million) and Rs. 22 crore (Mexican Peso 60 million), respectively in the subsidiary.
(3) During the year ended March 31, 2009, the Company incorporated wholly-owned subsidiary, Infosys Technologies (Sweden) AB, which was capitalized on July 8, 2009.
(4) On August 7, 2009, the Company incorporated wholly-owned subsidiary, Infosys Tecnologia DO Brasil LTDA. As of March 31, 2010, the Company has invested an aggregate of Rs. 28 crore (BRL 11 million) in the subsidiary.
(5) On October 9, 2009, the Company incorporated wholly-owned subsidiary, Infosys Public Services Inc. As of March 31, 2010, the Company has invested Rs. 24 crore (US $5 million) in the subsidiary.
(6) Infosys BPO s.r.o, Infosys BPO (Poland) Sp.Z.o.o, Infosys BPO (Thailand) Limited and McCamish Systems LLC are wholly-owned subsidiaries of Infosys BPO.
(7) Mainstream Software Pty Limited is a wholly-owned subsidiary of Infosys Australia.
(8) On August 19, 2009, Infosys Consulting Inc incorporated a wholly-owned subsidiary, Infosys Consulting India Limited. As of March 31, 2010, Infosys Consulting has invested Rs. 1 crore in the subsidiary.
(9) On December 4, 2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta, Georgia, in the U.S.. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of Rs. 173 crore and a contingent consideration of Rs. 67 crore. The acquisition was completed during the year and accounted as a business combination which resulted in goodwill of Rs. 227 crore.

 

24.2.13. Provision for doubtful debts

Periodically, the Group evaluates all customer dues to the Group for collectability. The need for provisions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates and general economic factors, which could affect the customer's ability to settle. The Group normally provides for debtor dues outstanding for 180 days or longer as at the Balance Sheet date. As at March 31, 2010, the Group has provided for doubtful debts of Rs. 21 crore (Rs. 66 crore as at March 31, 2009) on dues from certain customers although the outstanding amounts were less than 180 days old, since the amounts were considered doubtful of recovery. The Group pursues the recovery of the dues, in part or full.

24.2.14. Segment reporting

The Group's operations predominantly relate to providing end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance, delivered to customers globally operating in various industry segments. Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the Group are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments are categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably. The Group believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as ‘unallocated’ and directly charged against total income.

Fixed assets used in the business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

Customer relationships are driven based on the location of the respective client. North America comprises the U.S., Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the U.K.; and the Rest of the World comprising all other places except those mentioned above and India.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.

Industry segments

Years ended March 31, 2010 and March 31, 2009 :

in Rs. crore
Particulars
Financial Services Manufacturing Telecom Retail Others Total
Revenues 7,731 4,506 3,661 3,035 3,809 22,742
  7,358 4,289 3,906 2,728 3,412 21,693
Identifiable operating expenses 3,068 1,993 1,284 1,243 1,544 9,132
  3,042 1,830 1,431 1,120 1,347 8,770
Allocated expenses 1,953 1,139 926 767 964 5,749
  1,942 1,133 1,033 720 900 5,728
Segmental operating income 2,710 1,374 1,451 1,025 1,301 7,861
  2,374 1,326 1,442 888 1,165 7,195
Unallocable expenses 905
            761
Operating income 6,956
            6,434
Other income, net 934
            475
Provision for investments (9)
            2
Net profit before taxes and exceptional item 7,899
            6,907
Income taxes 1,681
            919
Net profit after taxes before exceptional item 6,218
            5,988
Income on sale of investments, net of taxes 48
           
Net profit after taxes and exceptional item 6,266
            5,988
 
Geographic segments

Years ended March 31, 2010 and March 31, 2009 :

in Rs. crore
Particulars
North America Europe India Rest of the World Total
Revenues 14,972 5,237 270 2,263 22,742
  13,736 5,705 284 1,968 21,693
Identifiable operating expenses 6,067 2,093 80 892 9,132
  5,716 2,284 62 708 8,770
Allocated expenses 3,784 1,325 68 572 5,749
  3,624 1,507 76 521 5,728
Segmental operating income 5,121 1,819 122 799 7,861
  4,396 1,914 146 739 7,195
Unallocable expenses 905
          761
Operating income 6,956
          6,434
Other income, net 934
          475
Provision on investments (9)
          2
Net profit before taxes and exceptional item 7,899
          6,907
Income taxes         1,681
          919
Net profit after taxes before exceptional item 6,218
          5,988
Income on sale of investments, net of taxes 48
         
Net profit after taxes and exceptional item 6,266
          5,988