Financial Daily from THE HINDU group of publications
Wednesday, Sep 29, 2004
Financial Daily from THE HINDU group of publications Wednesday, Sep 29, 2004 |
||
|
|
||
|
Home Page
-
Outsourcing Info-Tech - Taxation Taxation of BPO units: CBDT issues revised circular K.R. Srivats
New Delhi , Sept. 28 THE Central Board of Direct Taxes (CBDT) on Tuesday issued a revised circular spelling out the tax treatment of IT-enabled business process outsourcing (BPO) units in India. The draft of the revised circular was issued in August this year, which has now been given a final shape after factoring in feedback from trade and industry and tax professionals. The revised circular has made it clear that the profits attributable to an Indian entity constituting the permanent establishment (PE) of the non-resident or foreign entity would be determined on the basis of "arm's length principle". The stance taken in the circular is in consonance with the OECD guidelines on attribution of income to a permanent establishment. "The final circular has clearly specified that the profits attributable to a PE would have to be determined on an arm's length basis by adopting the existing transfer pricing provisions in the Income Tax Act, 1961. This is welcome step as they have specified that arm's length price would have to be computed on the basis of Indian transfer pricing provisions," Mr Samir Gandhi, Tax Partner, Deloitte, Haskins and Sells, told Business Line here. The final revised circular has also held that business connection between two entities need not necessarily result in a PE. "This is also a welcome step. Now PE would be decided on the basis of the actual tests for constitution of PE. This is much better than assuming that every business connection would necessarily result in a PE," Mr Gandhi said. Tax professionals, however, apprehend that the allowability of expenditure, for determining the profits attributable to a PE, may get curtailed as a result of the revised circular.
More Stories on : Outsourcing | Taxation
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|