In a move to soothe the frayed nerves of foreign institutional investors, the Central Board of Direct Taxes (CBDT) has asked its field officers to settle within a month all claims made under the ambit of DTAAs.
In a letter issued on Friday, it directed that decisions may be taken on such claims within a month of their filing. This move may not help end the minimum alternate tax (MAT) row, but will provide some comfort to foreign investors frustrated by the slow and complex decision-making process of the tax authorities.
Meanwhile, Minister of State for Finance Jayant Sinha informed the Lok Sabha that the Income-Tax Department has issued MAT-related tax notices in 68 cases of overseas funds, involving a total tax demand of ₹602.83 crore.
The CBDT letter assumes significance as it comes on the heels of the Finance Ministry’s recent attempts to diffuse the MAT row that threatens to affect foreign investors’ perception of India.
However, tax experts have a slightly different take. They say that the letter only reinforced the legal position — a taxpayer (FII) can claim tax treaty benefits only to the extent they are beneficial to them vis-à-vis the Indian income-tax law.
The letter neither mentions MAT nor does the CBDT provides clarity on whether MAT provisions are applicable to foreign companies, said Aseem Chawla, Partner, MPC Legal, a law firm.
“For those who do not have treaty protection, the controversy would continue till it is settled either by the Government or by the courts”, said Sunil Shah, Partner, Deloitte, Haskins & Sells.