Five FPIs challenge MAT before Bombay HC; hearing on May 6

Five foreign portfolio investors (FPIs) from the US and the UK today moved the Bombay High Court challenging the Income Tax department's demand for Minimum Alternate Tax (MAT) on the profit earned from trading in stocks and bonds.
The petition, filed by 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, is expected to come up for hearing on May 6.
These investors, who are not covered under the double taxation avoidance agreements (DTAAs), received notices from the IT department earlier this month asking them to pay MAT.

So far, the tax department has sent demand notices to 68 non-DTAA FPIs, seeking altogether Rs 602.83 crore.
As there are close to 3,000 FPIs, most of them not covered by DTAAs, the IT department is expecting to collect around Rs 40,000 crore.
Around 40 per cent of the FPIs in the country come through Singapore and Mauritius with which India has DTAAs. These are, therefore, not liable to pay MAT on the capital gains but their holding in the domestic stock market is only around 30 per cent of the total Rs 22 trillion.
As the MAT issue tripped the market -- Sensex shed more than 900 points in April alone -- the government has reached out to FPIs. In an editorial in The Financial Times, Finance Minister Arun Jaitley earlier this week suggested formation of a panel to look at legacy issues to resolve the problem within a month.