The obvious question to be asked after the government’s acceptance of the Justice A P Shah panel’s recommendation that the minimum alternate tax (MAT) is not applicable on the FIIs prior to April 1, 2015, is what would be the government stand in the Castleton Investment Ltd case, which is in the Supreme Court.
MAT on FIIs has been abolished from April 1 this year and the government has now decided to amend the Income Tax Act to clarify that it is not applicable even prior to that.
While the matter has been closed for the FIIs, the applicability of MAT on foreign companies, and this is where the Castleton case is important, needs to be settled.
Justice A P Shah, who is heading the panel that has been set up to suggest measures for handling the pending tax issues, said in an extensive conversation with The Financial Express that the committee’s findings in the MAT on FIIs issue make the situation very clear.
“In view of the fact that the government has accepted this report, it would mean that a foreign company which is not having a permanent establishment (PE) or a place of business in India, will not be liable to pay MAT here. If Castleton is a company having no PE or having no place of business, that’s the end of the matter, it would not be liable. I don’t think much would survive in the case now because the government has accepted the report. They (Castleton) claim that they are not having a PE or place of business in India,” said Justice Shah.
The government is expected to go by the committee’s findings in dealing with the applicability of MAT on the companies, too, as it has already accepted its view in case of the FIIs.
It has currently sought more time to study the Shah panel report and Attorney General Mukul Rohatgi has told the bench headed by Chief Justice of India H L Dattu that the government needs additional time to establish its position.
The apex court postponed the hearing on August 5, on the Mauritius-based Castleton Investment Ltd’s appeal seeking clarity on the tax consequences on foreign companies which do not have a permanent establishment in India, to September 29.