To assuage concerns of foreign portfolio investors slapped with MAT demand, the government today put on hold issuance of fresh notices and any further assessments on levy of this tax on such entities.
Finance Ministry issued a circular to international taxation wings of the Income Tax department following constitution of a high-level committee headed by Justice (Retired) A P Shah, Chairman, Law Commission, to look into the issue of levy of minimum alternate tax (MAT) on capital gains made by FIIs in past years.
“In the light of Finance Minister’s announcement, no coercive action be taken for recovery of demand already raised by invoking provisions of MAT in the cases for foreign companies,” the circular said.
Finance Minister Arun Jaitley had announced constitution of the Shah panel in reply to discussions on Finance Bill in Rajya Sabha last week.
“Issue of fresh notice for reopening of cases as also completion of assessment should also be put on hold unless the case is getting barred by limitation,” the circular said.
While Jaitley did not set any time-frame for the panel to submit its report, the Committee is likely to give its recommendations expeditiously, sources said.
Commenting on the move, Amit Maheshwari, Partner, Ashok Maheshwary & Associates, said, “This move of CBDT was expected and is much welcome in line with the government’s recent announcements to allay the fears of FIIs.
“Going forward, it would be really helpful if the CBDT is more pragmatic in their approach and not go for aggressive tax demands which threaten to derail the improving investment climate of the country.”
While the government waived off levy of 20 per cent MAT on capital gains made by FIIs and foreign portfolio investors from this fiscal, the disputes regarding levy of MAT for past years will be looked into by the Shah panel.
The panel is likely to have three members, including tax experts.
Given that cases are pending in courts, sources said the committee’s report would give a forward looking direction to the government to resolve the MAT dispute.
The tax department has already issued notices to 68 FIIs, amounting to Rs 602 crore, for non-payment of MAT at the rate of 20 per cent of capital gains made by them.
The committee would also look into direct tax policies and legacy issues that bring uncertainty in tax administration.