(UPDATED 5/21/2015) India’s Central Board of Direct Taxes (CBDT) on May 11 instructed field officers to stop issuing new tax assessments against foreign companies, particularly foreign financial institutions, for minimum alternate tax (MAT), except in cases where the statue of limitations is about to expire. The government also all told the officers to halt action in cases that are underway.
The move comes in response to intense pressure by foreign financial institutions to halt India’s assessment of MAT on their sales of Indian listed shares occurring prior to April 1. The demands, issued for the first time a few weeks ago, followed the government’s February budget, which pronounced that MAT would not apply to foreign institutional investors from April 1, but was silent regarding transactions undertaken before that date. The demands were also consistent with a 2012 case decided by India’s Income Tax Authority for Advance Rulings, Castleton Investment Ltd, now pending before the Supreme Court, as well as other cases.
Aberdeen Asset Management is among companies that have challenged their MAT assessments in court.
The CBDT said its decision to halt further action was appropriate because a committee headed by Justice A.P. Shah is looking into the issue of MAT on FIIs and will soon present a report on its findings.
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UPDATE (5/21/2015): India establishes committee to consider imposition of MAT on FFIs prior to April 1. The Indian government on May 20 tasked a committee headed by Justice A.P. Shah, former Chief Justice of Delhi High Court and current Chairman of the Law Commission of India to look into the issue of whether the government should impose MAT on FFIs prior to April 1. See, release.
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