« Top Headlines » Open DEMAT Account in 24 hrs  Mock Test Papers Series - I & II for Students appearing in CA Foundation January 2027 Examination.  Income Tax Rules 2026: CBDT Introduces Revised Form 161 for Penalty Waiver, Clarifies Misreporting Categories and Taxpayer Relief  ITR Filing and Income Tax Audit Deadline Extended: 5 Critical Things Taxpayers Must Know  Filing Belated ITR for AY 2026-27? Know Which Losses You Can Carry Forward and Which You May Lose  CBDT Extends Tax Audit Report Deadline to October 21, ITR Filing Last Date to November 21 for AY 2026-27  CBDT Extends AY 2026-27 ITR Filing Deadline for Tax-Audit Cases: New Dates and Key Compliance Details  Foreign Assets Missing From Your ITR? Income Tax Department Opens One-Time Disclosure Window  Tax Audit Deadline September 30: Why AIS, TDS and GST Figures May Not Match Your ITR and What Taxpayers Should Do  Tax audit deadline September 30: Common mistakes taxpayers should avoid  Your ITR says ‘verified’, but the refund hasn’t arrived? 5 reasons why your money could be stuck  Missed the ITR Deadline but TDS Refund Is Due? Here’s How You Can Still Claim Your Money «  No consistency in PE income attribution... Corporate profit growth takes a dip in March quarter... » SC`s tax relief for MNCs` captive BPO units July, 10th 2007 In a major relief to foreign firms operating in India, the Supreme Court today held that their captive business process outsourcing (BPO) units are not liable to be taxed in the country if they are billing the subsidiaries on an arms length basis or without giving any preference.   The judgement was delivered in a case between US investment bank Morgan Stanley and the income tax department.   The department had said that outsourcing activities of Morgan Stanley Advantage Services (MSAS), the firms Indian arm, must be taxed.   A bench headed by Justice S H Kapadia said MSAS was not a permanent establishment (PE) as it was performing only back office operations in India and could not be taxed under PE rules, upholding an order of Authority for Advance Ruling (AAR).   There was no agency PE as the PE in India had no authority to enter into or conclude contracts. The contracts would be entered in the US. The implementation of those contracts only to the extent of back office functions would be carried out in India, the bench said.   The apex court also held that MSAS would be a service PE in India under the India-US Tax Treaty on account of the services to be performed by executives deputed by Morgan Stanley and not on account of stewardship activities.   The ruling is likely to benefit foreign companies like GE, HSBC, and Standard Chartered Bank that outsource back office functions to their Indian units.   Foreign companies operating in India pay tax at a rate of about 42 per cent and the judgement establishes that the income of subsidiaries on work done for parent companies is not taxable.   Tax consultant Mukesh Butani, partner, BMR & Associates, said it was a big relief for captive BPOs as the apex court had ruled on two important principles.   One, stewardship activity does not constitute a PE. Second, if the Indian BPO is remunerated on an arms length basis, no further income of a multinational can be attributed to India, he said.   Morgan Stanley counsel Jay Savla said it was a victory for the US investment bank as the court had held that the Indian subsidiarys income arising from global operations will not be taxed in the country.   Only that income will be taxed on the basis of the transfer pricing principle which arises from Indian operations, he added.   Industry experts said the judgement will also help the government attract foreign investment in the BPO sector from multinationals that are shifting their offshore operations to low-cost countries like India and China.