FinMin further softens MAT blow

Exempts foreign companies without permanent base in India with effect from April 2001

After clearing the air on Minimum Alternate Tax (MAT) on foreign portfolio investors ( FPIs), the finance ministry has decided to exempt foreign companies with no permanent establishment ( PE) in India from this tax with effect from the 2001- 02 assessment year. This will pave the way for a relief in favour of Mauritiusbased Castleton from the Supreme Court so far as MAT is concerned, experts said.

The ministry will propose an amendment with retrospective effect to Section II5 JB of the Income Tax Act, in this regard. The move came after Finance Minister Arun Jaitley promised investors at a gathering last week that pending tax disputes would be resolved soon.

The decision was announced on Thursday at a time when Prime Minister Narendra Modi is in the United States and will interact with top CEOs and the Indian diaspora in Silicon Valley.

“We have announced clarity on non- applicability of MAT on foreign companies other than FII not having PE today. We hope this will boost investor confidence,” Revenue Secretary Hasmukh Adhia tweeted.

In a statement on Thursday, the ministry said the government had decided that with effect from the said date, the provisions of 115JB ( MAT) would not apply to a foreign company on two conditions.

One, being based from a country having a double tax avoidance agreement ( DTAA) with India and not having a permanent establishment here.

Business Standard, New Delhi, 25th Sept.2015