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USD ($)
USD ($) / shares
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. INCOME TAXES</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The domestic and foreign source component of income (loss) before income taxes is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year ended March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Domestic
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(868</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,515</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,729</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign
</div></td>
<td> </td>
<td> </td>
<td align="right">11,007</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,200</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,967</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income before income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,139</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,685</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,238</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center" style="font-size: 10pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s provision (benefit) for income taxes consists of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year ended March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Current taxes</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Domestic taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">13,058</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,249</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,033</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">13,058</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,249</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,033</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Deferred taxes</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Domestic taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12,006</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,251</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,690</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,052</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">998</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,343</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Domestic taxes are nil as there are no statutory taxes applicable in Jersey, Channel Islands.
Foreign taxes are based on enacted tax rates in each subsidiary’s jurisdiction.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A majority of the Company’s Indian operations are eligible to claim income-tax exemption with
respect to profits earned from export revenue from operating units registered under the Software
Technology Parks of India (“STPI”). The benefit is available for a period of 10 years from the date
of commencement of operations, but not beyond March 31, 2011. The Company had 13 delivery centers
for the year ended March 31, 2011 eligible for the income tax exemption, which expired on April 1,
2011 for all the units. The Company also has a delivery center located in Gurgaon, India registered
under the Special Economic Zone (“SEZ”) scheme and eligible for 100% income tax exemption until
fiscal 2012, and 50% income tax exemption from fiscal 2013 till fiscal 2022. The Company’s
operations in Costa Rica and the Philippines are also eligible for tax exemptions which expire in
fiscal 2017 and fiscal 2013 respectively. The Company’s
operations in Sri Lanka were also eligible
for tax exemptions which expired on April 1, 2011. However, recently
the Government of Sri Lanka has exempted the profit earned
from export revenue from tax. This will enable our Sri Lankan subsidiary to continue to claim tax exemption under Sri Lankan Inland
Revenue Act following the expiry of the tax holiday.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">If the income tax exemption was not available, the additional income tax expense at the statutory
rate of the respective jurisdiction in India and Sri Lanka would have been approximately $14,029,
$15,569 and $16,077 for the years ended March 31, 2011, 2010 and 2009, respectively. Such
additional tax would have decreased the basic and diluted income per share for the year ended March
31, 2011 by $0.32 and $0.31, respectively ($0.36 and $0.35, respectively, for the year ended March
31, 2010 and $0.38 and $0.37, respectively, for the year ended March 31, 2009).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a reconciliation of the Jersey statutory income tax rate with the effective tax
rate:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year ended March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income before taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,139</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,685</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,238</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Enacted tax rates in Jersey
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Statutory income tax
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign minimum alternative taxes and state taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">107</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Differential foreign tax rates
</div></td>
<td> </td>
<td> </td>
<td align="right">958</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">853</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,086</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Others (permanent differences)
</div></td>
<td> </td>
<td> </td>
<td align="right">37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,052</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">998</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,343</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center" style="font-size: 10pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of deferred tax assets and liabilities are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Year ended March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Property and equipment
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">11,254</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9,552</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net operating loss carry forward
</div></td>
<td> </td>
<td> </td>
<td align="right">6,380</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,290</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accruals deductible on actual payment
</div></td>
<td> </td>
<td> </td>
<td align="right">3,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,260</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Share-based compensation
</div></td>
<td> </td>
<td> </td>
<td align="right">1,773</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,418</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Minimum alternate tax
</div></td>
<td> </td>
<td> </td>
<td align="right">20,398</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,904</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Others
</div></td>
<td> </td>
<td> </td>
<td align="right">603</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">250</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deferred tax assets
</div></td>
<td> </td>
<td> </td>
<td align="right">43,733</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,674</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Valuation allowances (a)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,782</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,073</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax assets, net of valuation allowances
</div></td>
<td> </td>
<td> </td>
<td align="right">37,951</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,601</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Property and equipment
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(26</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(26</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Intangibles
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,674</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,718</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Others
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(384</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(57</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,084</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,801</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net deferred tax assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">30,867</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18,800</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>The change in valuation allowance of $709 is the result of valuation
allowance recognized on deferred tax assets on net operating losses of a
foreign jurisdiction for the year ended March 31, 2011, where the Company
believes that based on available evidence, it is more likely than not,
that the asset will not be realized.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center" style="font-size: 10pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the activities related to the Company’s unrecognized tax benefits
for uncertain tax positions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year ended March 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Opening balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,970</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16,953</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">17,038</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">(Decrease) increase related to prior year tax positions
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(614</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">147</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase on account of business combinations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase related to current year tax positions
</div></td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,296</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,519</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes
</div></td>
<td> </td>
<td> </td>
<td align="right">126</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">574</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,791</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Closing balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,582</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19,970</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16,953</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total unrecognized tax benefits that, if recognized, would affect the Company’s effective tax
rate, were $19,476, $19,864 and $16,847 as at March 31, 2011, 2010 and 2009, respectively. During
the year ended March 31, 2011, the Company has reversed interest of $65 since it is no longer
required to record such interest on its balance sheet and recognized $48 as interest on tax obligations for prior year tax positions. For the
years ended March 31, 2010 and 2009, the Company recognized $147 and $81, respectively, as
interest on tax obligations. As at March 31, 2011, 2010 and 2009, the Company has accrued $569,
$586 and $439, respectively as interest on tax obligations. As at March 31, 2011, corporate tax
returns for years ended March 31, 2007 and onwards remain subject to examination by tax authorities
in India.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As at March 31, 2011, the Company had net operating loss carry forward aggregating to $19,953 in
India which expires between 2012 and 2014 and unabsorbed depreciation carry forward aggregating to
$22,351 which does not have any expiration. The Company has not recorded deferred tax assets on
losses and unabsorbed depreciation aggregating to $42,304 as there is uncertainty regarding the
availability of such amounts to offset taxable income in subsequent years. As at March 31, 2011,
the Company had $2,550 of tax benefits carried forward in the US which expires in 2027, these
pertains to exercise of options. As at March 31, 2011, the Company had net operating loss carry
forward aggregating to $3,716 in UK, which does not have any expiration.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income taxes on undistributed earnings of foreign subsidiaries have not been provided as
such earnings are deemed to be permanently reinvested.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In August 2009, the Government of India passed the Indian Finance (No. 2) Act, 2009, which extended
the tax holiday period by an additional year through fiscal 2011. Further, the Act also abolished
the levy of fringe benefit tax (“FBT”) and increased the minimum alternate tax (“MAT”) rate from
11.33% to 16.995%. Consequent to such amendments, the Company recorded a net deferred tax benefit
of $442 in the year ended March 31, 2010 towards deferred tax assets and liabilities expected to
reverse during the extended tax holiday period. The Government of India vide Finance Act, 2011 has
increase the MAT rate to 20.01% in the case of profits exceeding
Rs 10 million ($0.2 million) and
19.06% in the case of profits not exceeding
Rs 10 million ($0.2 million) in fiscal 2012 and also
levied MAT on the profits earned by the SEZ units. The Finance Act, 2011 has been enacted on April
8, 2011 but has no impact on deferred tax computations, as the change in tax rates are effective
from April 1, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Under a restructuring plan, the Company’s seven Indian subsidiaries, Ntrance, Marketics
Technologies India Private Limited, WNS Workflow Technologies (India) Private Limited, WNS Customer
Solutions Private Limited, WNS Customer Solutions Shared Services Private Limited, COSC and NCOP,
amalgamated with its Indian subsidiary WNS Global. The amalgamation order has been approved by the
High Court of Bombay vide an order dated August 27, 2009 and the amalgamation is effective April 1,
2007. Further under another restructuring plan, the Company’s three Indian subsidiaries, First
Offshoring Technologies Private Limited, Servicesource Offshore Technologies Private Limited and
Hitech Offshoring Services Private Limited, amalgamated with its Indian subsidiary WNS Global. The
amalgamation order has been approved by the High Court of Bombay vide an order dated March 25, 2010
and the amalgamation is effective April 1, 2008. The Company believes that these amalgamations
would streamline its administrative operations, help achieve operational and financial synergies,
and reduce its costs and expenses relating to regulatory compliance. The amalgamation did not have
a significant impact on the consolidated financial statements of the Company, except for income
taxes. As a result of the amalgamation, the amalgamated entities, which prior to the amalgamation
were individually assessable for income taxes, effective April 1, 2007, are assessable as one
amalgamated entity, resulting in a reduction of income taxes by $261 for fiscal 2010.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">In January 2009, the Company received an order of assessment from the Indian tax authorities that
it believes could be material to the Company given the magnitude of the claim. The order assessed
additional taxable income for fiscal 2005 on WNS Global, that could give rise to an estimated
$16,291 in additional taxes, including interest of $5,054. The assessment order alleges that the
transfer price the Company applied to international transactions between WNS Global and its other
wholly-owned subsidiaries was not appropriate, disallows certain expenses claimed as tax deductible
by WNS Global and disallows a tax holiday benefit claimed by the Company. In March 2009, the
Company deposited $224 with the Indian tax authorities pending resolution of the dispute. The first
level Indian appellate authorities have ruled in the Company’s favor in its dispute against an
assessment order assessing additional taxable income for fiscal 2004 on WNS Global based on similar
allegations on transfer pricing and tax deductibility of similar expenses and overturned the
assessment. The Indian tax authorities contested the first level
Indian appellate authorities’ ruling before the second
level appellate authorities and resolution of the
dispute is pending. The Company disputed the order of assessment for fiscal 2005 before first level Indian appellate
authorities. In November 2010, the Company received the order from first level Indian appellate
authorities in respect of the assessment order for fiscal 2005 deciding the issues in the Company’s
favor. However, the order may be contested before higher appellate authorities by the Indian tax
authorities.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 30, 2009, the Company received a draft order of assessment for fiscal 2006 from the
Indian tax authorities (incorporating the transfer pricing order received on October 31, 2009). The
Company had disputed the draft order of assessment before the Dispute Resolution Panel, or DRP, a panel
set up by the Government of India as alternate first level
appellate authorities. In September 2010, the
Company received the DRP order as well as the order of assessment
giving effect to the DRP order that
assessed additional taxable income for fiscal 2006 on WNS Global that could give rise to an estimated $10,233 in
additional taxes, including interest of $3,588. The assessment order
involves issues similar to that alleged in the order for fiscal 2005. Further, in September
2010, the Company has also received the DRP orders as well as the orders of assessment giving
effect to the DRP orders, relating to certain other Indian subsidiaries of the Company assessed for tax in India,
that assessed additional taxable income for fiscal 2006 that could give rise to an estimated $6,113
in additional taxes, including interest of $2,135. In March 2011, the Company deposited $179 with
the Indian tax authorities pending resolution of the dispute. The DRP orders as well as assessment
orders allege that the transfer price the Company applied to
international transactions with its
related parties were not appropriate and taxed certain receipts claimed by the Company as not
taxable. The Company has disputed these orders before higher
appellate tax authorities.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2011, the Company received the order of assessment for fiscal 2007 from the Indian tax
authorities (incorporating a transfer pricing order received in November 2010) that assessed
additional taxable income on WNS Global that could give rise to an estimated $19,116 in additional
taxes, including interest of $6,204. Further, in February 2011, the Company has also received the
orders of assessment, relating to certain other subsidiaries of the
Company assessed for tax in India, that
assessed additional taxable income for fiscal 2007 that could give rise to an estimated $10,352 in
additional taxes, including interest of $3,258. In March 2011, the Company deposited $671 and $905
with the Indian tax authorities pending resolution of the dispute for WNS Global and other
subsidiaries respectively. The orders of assessment involve issues similar to that alleged in the
orders for fiscal 2005 and 2006. The Company has disputed the said orders of assessment before first
level Indian appellate authorities.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Based on
certain favorable decision from appellate authorities in previous years,
certain legal opinions from
counsel and after consultation with the Indian tax advisors, the Company believes the chances that
the above assessments would be upheld are remote.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2009, the Company received from the Indian service tax authority an assessment order
demanding payment of $7,746 of service tax and related interest and penalty for the period from
March 1, 2003 to January 31, 2005. The assessment order alleges that service tax is payable in
India on BPO services provided by WNS Global to clients. The Company has filed an appeal to the
appellate tribunal against the assessment order and appeal is currently pending. After consultation
with Indian tax advisors, the Company believes the chances that the assessment would be upheld are
remote. The Company intends to continue to vigorously dispute the assessment.
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