Extend STPI scheme, says Nasscom

In its pre-Budget memorandum, Nasscom has asked for the continuation of the Software Technology Parks of India (STPI) scheme beyond 2009, tax exemption for non-residents who outsource their back-office processing and call centre activities to India, removal of exclusions from the expression "export turnover," and permission for Indian businesses to file consolidated tax returns.

On the direct tax front, Nasscom has argued that since business profits are arrived at after considering all expenses "" freight, telecommunication charges and expenses, if any, incurred in foreign exchange in providing technical services outside India "" it will be duplication if exclusions of specified expenses are repeated when arriving at the "export turnover" figure.

Hence, it has recommended that exclusions in the expression "export turnover" should be removed "to avoid absurd results." Alternatively, it has suggested, it should be clarified that exclusion of any item can be made only when the export turnover specifically includes such an item.

Also, the expression "total turnover" should be arrived at in a like manner, ensuring harmony between the numerator and the denominator. This view is consistent with Section 80HHE and has been adopted by appellate authorities even for Section 10A.

It has also suggested that tax exemption be given to non-residents outsourcing their back- office processing and call centre activities to India, in an effort to boost the business prospects of the BPO industry, as well as remove the concerns of non-residents.

The software body has further recommended the introduction of a system of consolidated tax returns for group entities "to eliminate the economic distortions on account of inter-company transactions within a group and thereby ensure reduction in tax avoidance practices like intra-group dealings, loss cascading and value shifting."

While suggesting the continuation of the STPI scheme beyond 2009, Nasscom has argued that it will provide "a fresh lease of life to the STPI scheme in parallel, as this has proven to be a big success and a major cause of the growth of the software industry."

A Nasscom release said, "the best course will be to continue the tax exemption for STPIs for another 10 years (beyond 2009), so that companies can continue to avail of benefits and have the time to adjust to the SEZ framework which will take 2 or 3 years to really get operational. The extension should be made concurrent with the tax holiday provided for exporting units in SEZs."