Bombay High Court extends Aberdeen's MAT stay

Case to be heard next week

The Bombay High Court has said the interim relief granted to foreign portfolio investor (FPI) Aberdeen would continue till next week. The tax department had levied minimum alternate tax (MAT) on the FPI, proceedings in which the court had stayed in May. The high court will next hear the case on June 30.

The foreign portfolio investor had argued that tax authorities had passed a final order instead of a draft one. This did not allow the investor to appeal in the Dispute Resolution Panel (DRP), which hears cases related to tax demands. The court had granted a stay in May.

The MAT was originally introduced to ensure that companies paid a bare minimum in taxes. There were many Indian companies which made large profits but did not pay taxes on account of various exemptions. The MAT provision requires all companies to pay around 20 per cent tax, irrespective of any exemptions that may be available. The Authority of Advance Rulings had recently said MAT also applies to FPIs. An appeal against the decision is pending in the Supreme Court.

 

Meanwhile, the tax department moved to collect MAT from FPIs. The finance minister, in his Budget speech, said MAT would not apply to FPIs. The tax department said this was prospective, and FPIs are still liable to pay taxes for previous years. They had sent 68 notices for Rs 602 crore, according to a reply filed in Parliament.

Many foreign investors subsequently appealed against the decision in the high court and the the panel. The Aberdeen case is being seen as more of a technical stay because due procedures were not correctly followed in MAT proceedings. The impact on the overall issue of MAT and whether MAT would apply to FPIs is still to be addressed.

The government has set up the AP Shah Committee to look into the issue.