Nasscom seeks extension of STP scheme

NEW DELHI: Pitching for an extension of the Software Technology Park (STP) scheme, software association Nasscom on Tuesday asked the government to continue the tax exemption for STPs for another 10 years. The stipulated sunset period for the STP scheme is 2009.

Nasscom has also reiterated its earlier demand for a clarification that arms-length price payable to IT enabled/BPO unit in India be determined only on the basis of the activities performed by such units in India, and without attributing any profits of the non-resident outsourcing such work to India.

Arms-length price refers to the price at which two unrelated parties would agree to a transaction. This is most often an issue in case of companies with international operations whose international subsidiaries trade with each other.

“To boost the business prospects of the BPO industry as well as remove the concerns of non-residents, an explicit clarification should be included in the Indian Income Tax legislation to state that in case the price paid to the Indian IT enabled or BPO unit is found to be insufficient after applying the arms-length principle, any consequential adjustment towards the shortfall shall be made only in the hands of IT enabled/BPO unit in India and not in the hands of the non-resident,” Nasscom said in its budget wishlist to the government.

Nasscom added in case the Indian BPO unit activities are assessable to tax on the basis of arm-length principle under the Indian I-T Act, no further income shall be deemed to accrue to the non-resident or foreign enterprise relating to BPO work outsourced to such unit in India, and the foreign parent should not be required to file any separate return of income in India for such work.