The Supreme Court will hear the issue related to taxing of business processing outsourcing units of multinationals in the country on February 13.

While hearing appeals of income tax department and US investment banker Morgan Stanley, a bench headed by Justice Arijit Pasayat posted the matter for final hearing on February 13 when it will decide whether the appeals are admissible.

The income tax department and Morgan Stanley have filed appeals against the Authority for Advance Ruling.

The authority had held outsourcing activities carried by Morgan Stanley Advantage Services, the Indian arm of Morgan Stanley, did not constitute a permanent establishment (PE) and the company was not liable to pay tax in India on a portion of its profit.

However, the parent company and the subsidiary had to ensure they did not violate fair pricing norms, the AAR said.

The issue to be decided by the apex court has wide-reaching implications on the tax liability of foreign companies which outsource their back office functions to Indian companies.