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Published on Fri, Mar 14,2014 | 18:22, Updated at Fri, Mar 14 at 18:22Source : Moneycontrol.com
The IT sector in India has been fragmented into various sub-sectors such as Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), Legal Process Outsourcing (LPO), medical transcriptions, call centres, designing and engineering services, software development, etc. This list is expanding continually given the size, growth and complexity of this sector. It is thus natural that such distinction also comes into tax laws – especially on transfer pricing – where the need for reliable classification of IT and IT-enabled services (ITeS) has gained significant importance in recent times. As a result, a Special Bench (SB) of the Mumbai Tribunal was constituted to analyse whether the ITeS sector can be further dissected into BPO and KPO services. The Special Bench says KPO is an evolution of BPO and the two can't be classified separately; selection of comparables to be strictly based on functional analysis and not high/low margins. This SKP alert summarizes the Special Bench ruling.
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