Prime Minister Dr Manmohan Singh has constituted a Committee to review taxation of development centres and IT sector. The Committee will engage in consultations with stakeholders and related government departments to finalise the Safe Harbour provisions announced in Budget 2010 sector-by-sector. It will also suggest the approach to taxation of Development Centres.

The Prime Minister had earlier set up an Expert Committee on General Anti Avoidance Rules, GAAR under the Chairmanship of Dr. Partho Shome to engage in a widespread consultation process and finalise the GAAR Guidelines.

An official release says, while this Committee would address concerns on GAAR provisions and would reassure investors about the predictability and fairness of our tax regime, it was felt that there is still a need to address some other issues relating to the taxation of the IT Sector such as the approach to taxation of Development Centres. The newly constituted Committee will be headed by the former CBDT Chairman N. Rangachary.

Our Correspondent reports that many Multi National Companies, MNCs carry out activities such as product development, analytical work and software development through captive entities in India.

They exist in a wide range of fields including IT software, IT hardware , Pharmaceutical R&D and other scientific R&D which are popularly called Development Centres.

Over 750 MNCs have such centres at over 1100 locations in India. Since it is a highly competitive field with other countries wanting to grab a share of the pie, the government wanted clarity on their taxation.