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: Central Excise rule to resale the machines to a new company :: VAT Audit :: empanelment :: VAT RATES :: form 3cd :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: ACCOUNTING STANDARDS :: articles on VAT and GST in India :: due date for vat payment :: cpt :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT
 
 
« News Headlines »
 Securities excluded from GST ambit in revised Bill
 GST dilemma: Hope fades for new tax regime
 5nance.com launches tax investment platform
 Is government tapping your phone?
 Income tax department to use analytics to look for discrepancies in bank accounts
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice

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 2016 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