The Central Board of Direct Taxes (CBDT) has instructed its officers not to proceed with pre-April 1 Minimum Alternative Tax (MAT) demand notices issued to foreign institutional investors (FII)/ foreign portfolio investors (FPI).
The tax body, in an instruction, said the a Committee on Direct Tax matters chaired by Justice A.P. Shah was constituted to examine the issue of applicability of MAT on FIIs/ FPIs for the period prior to April 1. The Committee submitted its final report to the Government on August 25.
The Committee has recommended that Section 115JB of the Income Tax Act, 1961, be amended to clarify the inapplicability of the provisions of this particular section to FIIs/ FPIs having no permanent establishment (PE)/ place of business in India. The Government has accepted the said recommendation and it has been decided to carry out the appropriate amendment in the Act so as to prescribe that MAT provisions will not be applicable to FIIs/ FPIs not having a place of business / permanent establishment in India, for the period prior to 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 case,” it said.
Based on the court verdict, the Income Tax Department has raised demands amounting to over ₹ 600 crore. Now the instruction means that till 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 the existing tax regulations.
On Sept 1, the Finance Minister Arun Jaitley announced that the amendment in the Finance Act to bring about changes in the Income Tax Act will be introduced in the Parliament during the Winter Session.