The Bombay High Court has issued a stay order on the Income-Tax Department’s notice to Aberdeen Global Emerging Markets for payment of Minimum Alternate Tax (MAT). The petition was filed by Aberdeen this week after the tax department sent a notice demand for an undisclosed amount.

Hugh Young, Managing Director of Aberdeen Asia, had told Reuters that the company decided to appeal the tax demand as it was a matter of principle.

“We’ll probably end up spending a lot more on the legal challenge than the tax demand, but the point being that if you receive these and don’t challenge you can end up receiving a lot more,” Young told Reuters.

On Tuesday, a Division Bench headed by Chief Justice Mohit Shah directed the tax department to file its reply by June 18. The matter will be heard again on June 22.

The stay order will come as relief to other foreign institutional investors which are concerned about the tax department’s views on their liability to pay MAT for share transactions made in the past. The tax department has issued notices to about 68 institutions demanding ₹602 crore.

The global funds have argued that MAT was not applicable on foreign entities. Five other entities, including National Westminster Bank Plc, First State Asia Pacific Sustainability Fund, First State Indian Subcontinent Fund, First State Global Emerging Market Sustainability and BNP Paribas L1, have moved the court against the tax demand.

The Bombay High Court will be hearing these petitions on Wednesday.

The Centre has tried to reconcile with the investors by clarifying that MAT would not apply to foreign funds from April 1, 2015. It has, however, left it to the courts to decide on the past dues.

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