Aberdeen gets MAT relief: Bombay HC stays tax notice slapped on fund house

Tax experts are divided on whether the court's action will provide a major relief for the foreign investors

FP Staff May 06, 2015 08:20:36 IST
Aberdeen gets MAT relief: Bombay HC stays tax notice slapped on fund house

In a relief to Aberdeen, a foreign portfolio investor facing minimum alternate tax demand from the income tax department, the Bombay High Court yesterday stayed the notice slapped on the fund manager on technical grounds, say media reports.

According to Porus Kaka, lead counsel of Aberdeen quoted in a report in the Business Standard, the court has passed an interim order staying all the proceedings against the fund after it argued that the tax department passed a final order and not a draft order. The move by the department had obliterated the fund house's option to appeal in front of a disputes resolution panel.

According to Kaka, the next hearing is on 23 June.

Responding to the court's move, the tax department today said it will study the order before taking a view on the matter.

Aberdeen gets MAT relief Bombay HC stays tax notice slapped on fund house

ThinkStock

"I have yet not studied the Bombay High Court order on MAT notice to Aberdeen.... We will have to see if it is a general stay order. We will have to see if capital gains exemptions applies to Aberdeen under the bilateral tax treaty (DTAA)," Central Board of Direct Taxes (CBDT) Chairperson Anita Kapur was quoted as saying in a PTI report.

The tax department has send notices to FPIs and FIIs demanding tax on their business income with retrospective effect. According to a reply in Parliament, cited by the BS report, the department has sent as many as 68 notices amounting to demand worth Rs 602 crore.

The department's move has created considerable heartburn among the foreign investors, who have been pumping in money into the Indian equity markets. They allege double standard by the government as the retrospective demand notices have been issued despite the Budget 2015-16 proposing to do away with MAT on FIIs from 2016.

Five FPIs had filed a writ petition in the Bombay High Court against the notices issued to them. The court's interim order is in response to this.

However, tax experts are divided on whether the court's action will provide a major relief for the foreign investors.

According to a report in The Economic Times, the order is likely to improve the mood of the money managers in Singapore and Hong Kong.

Meanwhile, there are others who think the court has acted purely on a technical issue and will not bring a major relief for foreign investors as such.

“This was a case where the final order was passed and there was no option given to appeal at the DRP. Other FPIs are dealing with draft orders...," a tax consultant has been quoted as saying in the BS report.

In other words, as Sameer Gupta, tax leader for financial services, EY, has told the BS the court has not taken up the MAT issue.

Earlier Finance Minister Arun Jaitley, who was in Baku, Azerbaijan, to attend an ADB meeting had told CNBC-TV18 there that "this (tax demand on FIIs) is a legacy issue...when they represented to me, we amended the law so for the future the problem does not exist. It's a past issue."

Jaitley, who returned yesterday morning, had said tax notices were sent to the FIIs following a decision taken by a tax authority in India.

"Since it's a view taken by a judicial authority, as per the moment the view is there. Some people have challenged it before a superior court... we are awaiting the court verdict," he had added.

Updated Date:

also read

$6 bn tax demand: FM Jaitley lacks clarity on FII taxation and babus are cashing in
Business

$6 bn tax demand: FM Jaitley lacks clarity on FII taxation and babus are cashing in

Jaitley should have made a retrospective amendment where it was merited

Aadhaar-PAN linking: Govt proposes changes to ease process but renders it futile; here's why
Business

Aadhaar-PAN linking: Govt proposes changes to ease process but renders it futile; here's why

Aadhaar has been issued to 111 crore people but PAN only to 25 crore people out of whom there are just six crore taxpaying persons.