Zee Media Bureau
New Delhi: The government has accepted the Justice A P Shah panel report which recommends non-applicability of Minimum Alternate Tax (MAT) on FIIs, Finance Minister Arun Jaitley said on Tuesday.
The Finance Ministry will come out with requisite amendments to the Income Tax Act in the next Budget in February to clarify that MAT will not apply to FIIs for periods prior to April 1, 2015.
The A P Shah Committee, which was appointed by the government to go into the question of levy of MAT on capital gains made by foreign institutional investors (FIIs), submitted its report to the Finance Minister Arun Jaitley on July 24.
The panel had opined against levying of MAT on capital gains made by FIIs prior to April 1, 2015.
The controversy arose after the tax department, following an order by the Authority of Advance Ruling, sent notices to 68 FIIs demanding Rs 602.83 crore as MAT dues.
As regards to the applicability of MAT after April 1, 2015, Jaitley, in his Budget speech earlier in the year, had clarified that it would not apply on capital gains made by FIIs.
However, he remained silent on the applicability of MAT for periods prior to April 1, 2015. This prompted the tax authorities to issue notices to recover tax dues.
In the backdrop of the controversy, Finance Ministry appointed Shah panel to look into the whole gamut of issues and suggest steps to deal with the problem.
Foreign investors have invested about USD 20 billion in Indian stocks in the past year and USD 28 billion in bonds.
Historically, foreign investors have not paid this tax as it was believed that only Indian companies were subject to the levy.
In 2010, a tax tribunal ruled that MAT was not applicable to companies that do not have permanent establishment in the country.
With Agency Inputs
