Close treaty-related MAT cases in a month, taxmen told

Foreign investors are irked after receiving tax demand of Rs.40,000 crore for prior years in so-called MAT tax

The Central Board of Direct Taxes has issued a note instructing tax officials to decide on the cases in which foreign institutional investors are seeking minimum alternative tax exemptions under treaty pacts within the month of the claim.

Foreign investors are irked after receiving tax demand of Rs.40,000 crore for prior years in so-called MAT tax. They have been maintaining that the MAT tax applies only for domestic companies.

On Wednesday, Minister of State for Finance Jayant Sinha clarified that investors in jurisdictions (like Mauritius, Singapore) that had tax treaties with India will not be subject to MAT taxes and also said that investors should approach courts for relief on the tax demand for the prior years. Finance Minister Arun Jaitley has exempted foreign investors from paying MAT tax from April 1, 2015. “Since the issues involved in such cases are limited, such claims should be decided expeditiously.

Accordingly, it has been decided that in all cases of foreign institutional investors seeking treaty benefits under the provisions of respective DTAAs, (Double Taxation Avoidance Agreements) decision may be taken on such claims within one month from the date such claim is filed,” CBDT said in a circular issued on Friday.

“This is a welcome step which will clear the uncertainty for some categories of foreign portfolio investors. For those who do not have treaty protection, the controversy will continue till it is settled either by the government or by the courts,” Sunil Shah, Partner, Deloitte Haskins & Sells LLP, said.

London-based ICI Global, a lobby group representing investors managing $19.2 billion across continents, has said the Ministry clarification has not eased concerns.