New Delhi: The Income Tax department has served a Rs 150 crore tax demand on a BPO and not just on one. It has served such notices on more than six BPOs, most of which are headquartered in the US.
And the amounts in question range from Rs 15 crore to Rs 150 crore. The department claims these BPOs have a permanent establishment in India and so part of their global profits are taxable. Tax experts say this might scare away BPOs.
"Tax certaintly is one of the key factors while making a business decision to invest in India. If there is so much uncertainty regarding the tax position, it will hamper investments," said Partner and Tax Head at KPMG India Sudhir Kapadia.
The notices come after the department recently filed a special leave petition in the Supreme Court challenging the order of the authority for advance ruling in Morgan Stanley's case.
The AAR had held that as long as the transaction between the parties was at arms length, a permanent establishment would not be liable for tax.
In 2004, the Central Board of Direct Taxes had to revise its own circular on BPOs, after protests from the industry. But the final circular seems to be causing more litigation and confusion.
"The government having come out with a circular, that seems to suggest that there is no further attribution. Does it now want to go back on it?" said Dy Managing Partner at RSM & Co Dinesh Kanabar.
NASSCOM too seems concerned. NASSCOM head Kiran Karnik said that his organisation is seized of the matter.
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