Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« Top Headlines »
Open DEMAT Account in 24 hrs
 New Income Tax Act: ITR forms to be issued prior to FY28, says govt
 GSTR-9C Explained: Turnover Limit, Due Date, Statement Format & How to Prepare It in Tally Prime (2025 Update)
 Will Income Tax Department release new ITR forms by January 2026? Finance Ministry says this
 The Government of India has strengthened MSME protection through strict payment rules, ensuring that Micro & Small Enterprises receive timely payments from buyers. Under the MSME Development Act (MSMED Act), 2006, buyers must make payments within:
 ITR Refund Delays in India: Why They Happen & How to FastTrack Your Refund in 2025
 ITR Refund Delay: From Bank Errors To Department Checks, 5 Big Reasons Your Refund Gets Stuck
 Income Tax Slabs 2025: New Vs Old Regime; Which One Is Better For You For FY2025-26?
 Seamless Integration: How Tally Prime Connects Businesses to the Digital Economy
 Govt to notify new ITR forms, Income Tax Act 2025 rules by January 2026: CBDT chief
 Digital Efficiency for MSMEs: The Tally Prime Advantage
 5 Ways Tally Prime Reduces Cost and Boosts Productivity for Startups

BPO parent's support decides tax hit: I-T
January, 25th 2007

In a case that will impact the taxability of BPO units of MNCs in India, the government in its counter-affidavit in the Supreme Court on Wednesday said the service linkages and economic relationship between a parent company and its outsourcing units should be considered to determine whether an agency has a permanent establishment (PE) in India. The crucial aspect of determining whether the transactions were at an arms length should be left to the assessing officer, the government said.

The affidavit sums up the governments position as it seeks to challenge a decision by the Authority for Advance Rulings (AAR), which said Morgan Stanley was not liable for taxation in India as its transactions with its outsourcing unit, Morgan Stanley Advantage Services (MSAS), were at an arms length.

MSAS is a wholly-owned subsidiary of M/s Morgan Stanley International Holdings Inc, which is a part of the petitioner (Morgan Stanley) group of companies. It is engaged in the business of providing back office support services to various companies in the petitioners group, said the affidavit filed on behalf of director of I-T. The government has said the nature of services and their inter-connection between the parent companies and outsourcing units has to be taken into account for taxability purposes.

The agreement between the petitioner and MSAS has provided an unilateral advantage to the parent company with no recompense to the outsourcing unit. The right to rescind, amend, assign or enforce agreement rests with the customer, i.e.- the petitioner, and not with the supplier of services, i.e.- MSAS, said the affidavit.

MSAS was provided a logo and brand name of the parent company. The products developed by MSAS, described as deliverables, are the exclusive property of the petitioner group. Economically, MSAS is dependent on Morgan Stanley, which has to be taken into account, said the affidavit.

The government said AAR deciding the issue of arms length international transactions would nullify the effect of clause (ii) of proviso to Section 245-R (2) of I-T Act. Any AAR order on matters of valuation which would involve investigation would not be a feasible proposition and this is why it was kept outside competence of AAR by the legislature, added the affidavit.

The apex court is yet to decide on the maintainability of the I-T departments plea. Morgan Stanleys appeal challenging part of AAR findings is also yet to be admitted. AAR had said MSAS would be regarded as a PE of the parent company if it sent some of its employees for undertaking stewardship activities. Again, it would be treated as PE if it sent some employees on deputation by way of employment in MSAS for over 90 days. As regards the distinguishing of personnel ... it would be premature on part of AAR to decide on the issue which can be decided only by the assessing officer, said the affidavit.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2025 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting