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FPI's tax returns without balance sheet not to be treated as defective: CBDT
December, 11th 2015

Income tax returns filed by foreign portfolio investors without balance sheet or profit and loss account will not be treated as defective, the Central Board of Direct Taxes has said.

The clarification brings relief to foreign portfolio investors (FPIs) and puts to rest the controversy over imposition of minimum alternate tax (MAT) on them.

Foreign institutional investors or portfolio investors that are registered with Sebi and have no permanent establishment or place of business in India or have provided requisite information will benefit from this move.

This will put to rest a matter which has been a concern for corporate FPIs filing tax returns in India," said Suresh Swamy, partnerfinancial services tax at PwC India. The government accepted the A P Shah panel's recommendation that MAT will not apply to foreign companies that do not have a permanent establishment or a place of business in India and decided to amend the income tax law retrospectively from April 1, 2001.

Subsequently, the CBDT issued a circular to its field officials to take note of the government decision and dispose off pending cases and not pursue tax demands.

But income tax authorities had issued notices of defective returns under Section 139(9) of the Income Tax Act to FIIs and FPIs in cases where balance sheet or profit and loss account were not filled.

"In order to overcome this difficulty, it is clarified that such returns will not be treated as defective," the CBDT said in a statement on Thursday.

"All such cases, where the Sebi registration number has been provided by the FIIs/FPIs in the return for assessment year 2015-16 are being taken up for processing."

For previous assessment years, where the above information is not available in the income tax return, FIIs and FPIs may provide details in their online response on the e-filing portal of the income tax department, the statement added.

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