Date:02/10/2004 URL: http://www.thehindubusinessline.com/2004/10/02/stories/2004100202531700.htm

Back Tax on BPO: Chamber welcomes CBDT clarification

Our Bureau

Hyderabad , Oct. 1

THE Federation of Andhra Pradesh Chamber of Commerce and Industry (FAPCCI) has welcomed the Central Board of Direct Taxes (CBDT) clarification of IT enabled services and Business Process Outsourcing units and felt that this would provide the much needed boost to the sector.

In a statement, Mr O.P. Goenka, President of Fapcci, said that the CBDT circular 5 of 2004 issued on September 28, has clarified that the non-resident entity or the foreign company will be liable to tax in India only if the IT enabled BPO unit in India constitutes its permanent establishment.

Mr Goenka welcomed the clarification provided in the circular to avoid double taxation. If a foreign enterprise carries on business in another country through a permanent establishment, the profits of the enterprise may be taxed in the other country but only to the extent it is attributable to the permanent establishment.