New Delhi: The government Friday said it will soon take a decision on the Justice A P Shah Committee report on applicability of minimum alternate tax (MAT) on foreign investors, an issue which had riled FIIs.
The high-level Shah Committee today submitted to Finance Minister Arun Jaitley a 66-page report, the content of which has not been disclosed.
"We have just received the report. The government will examine, consider the report and take a decision. I cannot specify the date, but I can say that the decision will be taken soon and the government will not sit over the report. The government will take a decision on the matter as soon as possible," Revenue Secretary Shaktikanta Das told reporters.
The report comes against the backdrop of foreign investors dragging the government to court over applicability of MAT on capital gains made by them. Foreign institutional investors (FIIs) are hoping that the government will waive MAT prior to April 2015.
The government had in May appointed the Shah Committee to examine the matter relating to levy of MAT on FIIs prior to April 2015. The committee looked into all related legal provisions, judicial, quasi-judicial pronouncements and other relevant aspects.
"It's a unanimous report. We have received responses from industry, chartered accountant firms, CBDT and leading advocates," Shah said, adding that it would not be proper for him to disclose the content of the report.
The Supreme Court is hearing a petition filed by Castleton on levy of MAT while there is also another case on the same pending in the Bombay High Court.
"The Supreme Court hearing is still about 10-11 days away. We have time in between. We will go through the report. The course of action which the government will follow with regard to the Supreme Court hearing on August 4 can be decided in the next 10 days," Das said.
The Income Tax Department had sent notices to 68 FIIs demanding Rs 602.83 crore as MAT dues of the previous years. This has raked up a big controversy, with FIIs moving the higher court challenging the MAT demand.
Jaitley in Budget 2015-16 exempted FIIs from paying MAT with effect from April 1, 2015.
The panel, headed by Law Commission Chairman A P Shah, included former chief economic advisor Ashok Lahiri and Chartered Accountant Girish Ahuja as other two members.
Asked if the report would come as a relief to FIIs, Shah said: "It is not giving relief to any FII. It is only examining the issues, which arise out of inconsistent judgments of AAR... There are judgements of ITAT which are taking a very different view. We broadly looked into all aspects of working of FIIs, we have also gone into international practices. It takes a holistic view of the matter."
AAR had, in 2010, ruled that MAT did not apply to foreign companies which did not have an office in India.
But in 2012 the AAR directed Castleton to pay MAT in India on their book profits when it transferred shares from a Mauritius entity to a Singapore entity.
Shah said: "The term of reference was MAT on FIIs. We answered that."
Das added that "the Committee being a government appointed one, we will give a lot of weightage to the report".
Following the announcement of setting up of the panel, the tax department has directed its field officers to put on hold issuance of fresh notices and any further assessments on levy of this tax on such entities.
Das further said other legacy tax issues would be referred to the Shah committee in due course. The Shah panel has a one year term.
Experts, however, said the government should issue a circular clarifying its position on levy of MAT on FIIs before August 4, 2015, when the Supreme Court hears the Castleton case.
"One hopes that the recommendations would be for CBDT to issue clarification that MAT was not meant to apply to FIIs for the past years based on which all the litigation for the past can be resolved. It's important that the government firms up its stand in the next few days before the matter comes up in the Supreme Court," PwC India Partner Sunil Gidwani said.
Experts further said the foreign investor community is hopeful that the Shah committee has taken not only a position consistent with understanding of all the players for the past several years, but also a pragmatic approach to solve the issue, going forward.
