The Central Board of Direct Taxes (CBDT) has instructed its officers not to proceed with any pre-April 1 Minimum Alternative Tax (MAT) demand notices issued to foreign institutional investors (FII)/foreign portfolio investors (FPI).
The tax body issued an instruction to this effect after the Central government accepted a recommendation by the Justice AP Shah Committee that Section 115JB of the Income Tax Act, 1961, be amended such that MAT is not levied on FIIs and FPIs that did not have a permanent establishment or place of business in India before April 1.
“The field authorities are accordingly advised to take into consideration the above position and keep in abeyance, for the time being, the pending assessment proceedings in cases of FIIs/FPIs involving the above issue. They are further advised not to pursue the recovery of outstanding demands, if any, in such cases,” it said.
The Finance Act, 2015, prescribed exempting MAT on FIIs/FPIs from April 1.
However, the controversy began when tax authorities issued notices, based on a court verdict, to about 100 FPIs demanding MAT on ‘untaxed gains’ worth over ₹600 crore made by them in the Indian market over the previous years.
No action on notices The CBDT instruction implies that until the amendment is brought about, there will be no action on notices issued for levy of MAT on FIIs/ FPIs on transactions prior to April 1, 2015.
Further, those who have deposited the money will get a refund under existing tax regulations.
On September 1, Finance Minister Arun Jaitley had announced that the amendment in the Finance Act, to bring about changes in the Income Tax Act, will be introduced in Parliament during the Winter Session.