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Make CBDT circular on BPO taxation explicit: Nasscom

Our Bureau

New Delhi , Aug. 13

THE draft revised circular on BPO taxation issued by the Central Board of Direct Taxes (CBDT) recently has evoked a strong reaction from several parties.

While, the Associated Chambers of Commerce & Industry of India (Assocham) has demanded a withdrawal of the draft circular on the grounds that it would amount to additional taxation on the BPO sector, software association the National Association of Software and Services companies (Nasscom) said that the final circular should be "explicit".

"We would like it (the circular) to be explicit that the non-resident company or the foreign companies will not be subject to tax," the Nasscom President, Mr Kiran Karnik, said adding that the industry would send its inputs on the circular to the Finance Ministry early next week.

Terming the draft circular as "implicit", he said that different views could emerge from the circular.

Nasscom said that if the Indian entity is liable to be taxed at `arm's length' for the activities performed by it, no further income would be deemed to accrue or arise to the foreign principle, irrespective of the nature of activities - incidental or core - performed in India.

Assocham added that taking away incentives at this crucial juncture would only bring marginal short-term gain. "Compare this with what India would lose in the immediate and long term: employment generation, creation of ancillary industries in the areas of training, recruitment, transportation and food services," the Chamber said in a statement.

The revised circular issued by CBDT recently deals with taxation of the resident (Indian) entity, which has become a permanent establishment (PE) of the non-resident or foreign entity.

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