1. MAT row: Investors, banks want SC to hear them with Castleton

MAT row: Investors, banks want SC to hear them with Castleton

Say any ruling by the top court will vitally affect interests of interveners

By: | New Delhi | Published: July 18, 2015 12:27 AM

In the ongoing row over the imposition of minimum alternate tax (MAT) on foreign investors, global banks and investor lobby groups have requested the Supreme Court to hear them along with Mauritius-based Castleton Investment, which has sought clarity on tax consequences on foreign companies who do not have permanent establishment in India.

The apex court is likely to hear on August 5 the Castleton’s appeal against the August 14, 2012 order of the Authority for Advance Rulings (Income Tax) on August 5. While the apex court had issued notice to the department on October 5, 2012, it had admitted the CIL’s appeal on May 7, 2013. Castleton in April filed an application wanting the hearing to be brought forward to August to achieve a quicker resolution of the issue.

The lobby groups who have sought impleadment in the case are: the Investment Association, a trade body representing over 200 UK-based investment managers, the Investment Company Institute, a global association of around 17,000 regulated funds, including mutual funds, exchange-traded funds, closed-end funds, and unit investment trusts, Asia Securities Industry & Financial Markets Association, a Hong Kong-based lobby representing over 80 financial institutions in Asia, including banks and asset managers, and the Capital Markets Tax Committee of Asia, a financial services industry body comprising regional corporate tax directors of various banks, securities firms and other diversified financial services institutions.

They stated that any judgment rendered by the top court on the issues will vitally affect the interests of the interveners, thus they need to “intervene in the matter and file submissions on law as well as be heard through counsel.”

According to them, a number of the FPIs have been the subject of proceedings under Section 115JB (a provision relating to Minimum Alternate Tax of the Income Tax Act, 1961 on the premise that they are liable to pay MAT as per on their income earned in India.

Most of these affected FPIs have filed objections before the Dispute Resolution Panel against the draft assessment orders and some have also moved the Bombay High Court.

Though the government has said that MAT will not apply to such investors from April 2015, foreign investors are working together to fortify their opposition against the tax department in the apex court. The government has set up a committee under the chairmanship of Justice AP Shah to examine the issue of levying MAT on foreign portfolio investors (FPI). The panel is expected to submit its report by the end of this month.

CIL has challenged the AAR’s order that held that the company would have to pay MAT on capital gains arising from sale of shares, thereby withdrawing the benefit available under the India-Mauritius double tax avoidance agreement.

The Authority had ruled that the provisions of Section 115JB will be applicable to foreign companies who do not have permanent establishment  (PE) in India. This, according to the company, will nullify the benefits provided under the treaty.

The company said that the impugned order of the Authority was not in line with the view taken by it in its earlier rulings, in the case of Timken Company and Praxiar Pacific, that have attained finality now.

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