Mon. Sep 21st, 2020

Government Accepted Shah Committee’s Recommendation to Make Clarificatory Amendment on Non-Applicability of MAT on FII/FPIs

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In the light of controversy generated on the
applicability of the Minimum Alternate Tax (MAT) on FIIs/FPIs due to
inconsistent rulings of the Authority for Advance Rulings (AAR) on the issue,
the applicability of MAT on FIIs was excluded vide the Finance Act, 2015
amending the Income Tax Act, 1961 to that effect. However, the 2015 amendments
were only intended to apply prospectively from 1st April 2015 (the
financial year 2015-2016), which is the financial year 2016-2017; and therefore
there was no clarity on whether the MAT provisions will apply on foreign
companies for the period prior to 01.04.2015.

In light of this
controversy the Government thus constituted a committee on Direct Tax matters
chaired by Justice A.P. Shah with initial mandate to
examine the matter relating to levy of MAT on FIIs/FPIs for the period prior to
01.04.2015. The Committee has now recommended that Section 115JB of the
Income Tax Act, 1961 may be amended to clarify the in-applicability of MAT
provisions to FII/FPIs. The Government has accepted this recommendation and decided that an appropriate amendment to the Income Tax Act
will be carried out.  Through
the amendment the Government proposes to clarify that MAT provisions will not
be applicable to FIIs/FPIs not having a place of business/ permanent
establishment in India, for the period prior to 01.04.2015. Pending such
amendment, CBDT will convey to the field formations the decision of the
Government to accept the recommendation.

-Ministry
of Finance
Source: Legal news India

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