As announced by finance minister Arun Jaitley earlier this week, the Central Board of Direct Taxes (CBDT) on Thursday instructed field officers not to go ahead with the tax notices made to foreign portfolio investors regarding the levy of minimum alternate tax (MAT) on their trading gains in India.
An instruction issued to the officers made it clear the government has accepted the A P Shah committee’s recommendation that foreign portfolio investors (FPIs) not having a place of business in India are not liable to pay MAT. “Field authorities are accordingly advised to take into consideration the above position and keep in abeyance, for the time being, the pending assessment proceedings in cases of FIIs/FPIs involving the above issue,” said the instruction.
It also said field officers are advised not to pursue the recovery of outstanding demands, if any, in such cases.
Jaitley had made the government’s intention clear on Tuesday that it would amend the Income Tax Act in the winter session of Parliament clarifying that FPIs were not liable to pay 18.5% MAT on their trading gains for the period prior to April 1, 2015.
For the subsequent period, FPIs are anyway not liable to pay MAT under an amendment introduced in the law through this year’s annual budget. The Shah committee had recommended that section 115JB of the Income Tax Act may be amended to clarify that MAT provisions have never been intended to be applied on FPIs.
When the tax department recently issued notices to FPIs in about 68 cases with a total tax demand of R602.8 crore for the period prior to April 1, 2015, investors made a hue and cry and went to court, prompting to set up the committee.