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According to a tax ruling by the Indian Supreme Court, foreign companies need not pay taxes on global income earned from their outsourcing units if deals were conducted at market prices. The ruling came in favor of Morgan Stanley in a case brought against their BPO unit by Indian revenue officials who asked that the company pay taxes on its global income. The Authority of Advance Ruling said that global profits of multinationals were not taxable here as long as it paid an “arm’s length” (a price at which two unrelated parties would agree to a transaction) price to its Indian subsidiary.
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