Morgan Stanley PE case: Govt gets time in SC

NEW DELHI: Treading cautiously on a litigation being closely watched by the BPO industry, the government on Tuesday sought time to file an affidavit in Supreme Court with facts to prove US investment bank Morgan Stanley has a permanent establishment (PE) in India through which the services liable to tax are provided.

A Bench comprising Justices Arijit Pasayat and SH Kapadia allowed the government to place on record relevant documents and posted the case for further hearing on Wednesday.

Additional solicitor general Gopal Subramanium, appearing for the I-T department, said two technicalities have to be considered before arriving at any conclusion as it will have widespread repercussions on outsourcing units. He added that Morgan Stanley was rendering services through its PE in India, challenging the findings of the Authority for Advanced Rulings (AAR).

There are 17 sets of services which need to be considered here, but the tribunal���s verdict covers only 7, Mr Subramanium added. The second technicality, which has to be considered, is the provision of double taxation, he said.
Former attorney general Soli J Sorabji, appearing for Morgan Stanley, opposed the government���s plea.

The apex court is looking into admissibility of the appeal of I-T department seeking right to tax a slice of the global income of Morgan Stanley on the grounds that its BPO operations in India constitute PE, performing an integral role in its securities trading operations.