Government not to pursue MAT cases against FIIs: Sources

The Central Board of Direct Taxes (CBDT) is likely to soon issue instructions to field officers not to pursue pending cases of the controversial minimum alternate tax (MAT) against foreign institutional investors (FIIs), said informed sources on Tuesday.

A senior official here told IANS that "the income tax department will soon issue instructions to assessing officers on how to deal with cases relating to applicability of MAT for periods prior to April 1, 2015, to the effect that they will not pursue the tax notices already sent".

The source said that CBDT is also likely to come out with amendments to the Income Tax Act in the next budget in February to clarify that MAT will not apply to FIIs for periods prior to April 1, 2015.

"The legislative changes will happen in Finance Act next year," he said.

According to the source, the A.P. Shah Committee, appointed by the government to go into the question of levy of MAT on capital gains, which submitted its report to Finance Minister Arun Jaitley late in July, has suggested against levying of MAT on capital gains prior to April 1, 2015.

The Income Tax department had sent notices to 68 FIIs demanding Rs.602.83 crore as MAT dues of previous years, and these FIIs, in turn, moved court challenging the demand.

The CBDT had earlier said it will not raise any new demands for payments, and will take no coercive action to pursue claims that have already been filed under MAT.

"If order (on levying of MAT on FIIs) is in appeal, then we can certainly tell our assessing officer (that) please don't take it further; don't agitate it further and this is exactly what we did in Shell and Vodafone tax cases," CBDT chairperson Anita Kapur told reporters here.

"Shell and Vodafone cases went against us and once we accepted that judgment, we told our officers, please don't do future assessments and please don't further agitate these in appeals," she said.

In the 2015-16 Budget, Jaitley had exempted FIIs from paying MAT with effect from April.

Even after Jaitley's announcement, the Income Tax department sent notice to at least 90 foreign portfolio investors.

With the uncertainty created by MAT, foreign investors sold Indian shares and bonds of around $630 million on May 6, marking the biggest single-day sale since January 2014.