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The Justice A P Shah Committee on Friday submitted the report on applicability of minimum alternate tax (MAT) on foreign institutional investors (FIIs), which drew flak from overseas portfolio players, to finance minister Arun Jaitley. While the government said it would soon make the 66-page report public after examining it, experts hoped that it would rely on the committee's report when the Supreme Court hears a MAT case against Castleton in August. Revenue Secretary Shaktikanta Das told mediapersons that the government has enough time to decide on its position in the Supreme Court hearing, slated for August 4. However, Das did not disclose whether the report would be made public before that, though he said the government will give a lot of weightage to the report.
But, Rajesh H Gandhi, partner, Deloitte Haskins & Sells LLP, said, “It is expected that the government will rely on the Committee’s report when the Supreme Court hears Castleton early next month. If the report is favourable to the FPIs (foreign portfolio investors), the government might probably not press for levy of MAT before the Supreme Court.” On the other hand, Shah said, “This is not about giving relief to FIIs or anyone. We have examined the issues arising out of the inconsistent judgments of the AAR (Authority for Advance Rulings ), judgments of ITAT (Income Tax Appellate Tribunal) taking very different views. We have examined the material.”
The Supreme Court is hearing a petition filed by Castleton on levy of MAT, while there is also another case on the same, pending before the Bombay High Court.
Earlier, in 2012, AAR directed Castleton to pay MAT in India on their book profits when it transferred shares from a Mauritius entity to a Singapore one.
The Income Tax department had sent notices to 68 foreign institutional investors (FIIs) demanding Rs 602 crore as MAT dues of the previous years.
This has raked up a controversy, with FIIs moving the higher court, challenging the MAT demand.
Following the announcement of setting up of the panel, headed by Law Commission Chairman A P Shah and including former Chief Economic Advisor Ashok Lahiri and Chartered Accountant Girish Ahuja as members, the tax department has directed its field officers to put on hold issuance of fresh notices and any further assessments on levy of this tax on such entities.
Crux of the issue is whether the government will waive MAT prior to April 2015. From the current financial year, MAT, is anyway, not leviable on FPIs.
Das further said other legacy tax issues would be referred to the Shah committee in due course. Though he did not refer to specific issues, one of these issues is retrospective amendment to the Income Tax Act, that has also drawn flak from foreign investors.
