The SC was to hear on August 5 Castleton Investment’s plea seeking clarity on tax consequences on foreign firms which don’t have permanent establishments in India
The Supreme Court on Tuesday postponed to September 29 a hearing on whether the controversial minimum alternate tax (MAT) can be imposed on foreign investors who do not have permanent establishments in India, after the government sought more time to study the A P Shah committee report on the issue.
Attorney-general Mukul Rohtagi told the bench headed by Chief Justice of India H L Dattu that the government needs additional time to establish its position after incorporating the findings of the report submitted by the government-appointed panel to the finance ministry last month. The report on levying MAT on foreign portfolio investors (FPI) has not been made public yet.
The apex court was to hear on August 5 the Mauritius-based Castleton Investment Ltd’s (CIL) appeal seeking clarity on tax consequences on foreign companies which do not have permanent establishment in India. Even global banks and investor lobby groups have requested the Supreme Court to hear them along with Castleton’s appeal against the August 14, 2012 order of the Authority for Advance Rulings (AAR). 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.
While the apex court had issued a 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.
CIL has challenged the AAR’s order that held that the company would have to pay MAT on capital gains arising from the 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 of the Income Tax Act, 1961 will be applicable to foreign companies which do not have permanent establishment (PE) in India. This, according to the company, will nullify the benefits provided under the treaty.
According to the company, Section 115JB would have no application since the whole of gains on the sale of shares would be taxable under the normal provisions of the Act, and normal tax on such gains could never be less than 18.5% of the book profit where such gains credited to the profit and loss account in order for them to be brought to tax under Section 115JB.