Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: Central Excise rule to resale the machines to a new company :: due date for vat payment :: VAT Audit :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: cpt :: form 3cd :: TDS :: VAT RATES
 
 
« News Headlines »
 Income tax filing FAQs part 1
 Filing Income Tax Returns? Things To Keep In Mind As Deadline Approaches
 Filing of online return for 4th quarter of 2016-17- extension of period thereof.
 New tax accounting standards may reduce leeway for infrastructure companies
 GST – CONCEPT & STATUS – As on 01st May, 2017
 Govt extends VAT deadline, relief for developers
 Income Tax Appellate Tribunal Rules, 2017
 Got your Form 16? You should file income tax returns early to enjoy benefits
 Want to save tax? Here are 6 best investment options for you
 Income Tax department activates e-filing facility for all ITRs
 All the income-tax return forms for the current assessment year are available online

Has SC ruling clarified BPO tax status?
July, 16th 2007

The Central Board of Direct Taxes had endeavoured to provide certainty in respect of the taxation of BPO units through its circular 5/2004 dated September 28, 2004, on the basis of attribution of income to a Permanent Establishment (PE) on an arms length basis.

In the landmark decision in DCIT versus Morgan Stanley & Co Inc., the Supreme Court rendered its judgement on the taxation of captive outsourcing activities, whether they qualify as a PE and the amount of income, which may be attributed to profits from the BPO unit.

The Supreme Court undertook a functional and factual analysis of each back-office activity undertaken by Morgan Stanleys captive BPO. The Court held that these activities were in the nature of preparatory or auxiliary services, which though carried out at fixed place, do not qualify as a PE. The Supreme Court also held that, as long as the activities were in the nature of back-office operations and no contracts were concluded by the BPO independently, there was no agency PE.

Whilst pronouncing its judgement, the Supreme Court held that definition of PE, as adopted by India, is an inclusive definition which covers, among others, service PEs, agency PEs, software PEs, etc. In passing, the Supreme Court made reference to software PEs, where service providers may be required to act according to quality control specifications of their customers. However, this does not assist in determining the scope of software PEs and has in fact left room for uncertainty.

Though the Supreme Courts ruling has provided some relief to the BPO industry, on account of broad acceptance of the principle that as long as the transfer pricing analysis takes into consideration functions and risks undertaken by the BPO unit, no further profits will be attributable to taxation of such unit. However, the statement made by the Supreme Court in passing in relation to software PEs, may be used by the tax authorities as a garb to examine the potential tax incidence of such BPOs.

Aseem Chawla
Partner (Tax),
(Amarchand & Mangaldas & Suresh A Shroff & Co)

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions