Shah panel holds meeting with Tax Dept

The three-member committee is scheduled to meet on July 13 to deliberate on comments which it has received from various stakeholders

The high-level Justice A P Shah panel, set up to look into the levy of minimum alternate tax (MAT) on foreign institutional investors (FIIs), on Tuesday held consultations with officials of the tax department.

The committee, constituted in May, has already met various industry chambers to elicit their views on the controversy related to levying MAT on FIIs earnings.

The three-member committee, which includes former chief economic advisor Ashok Lahiri and chartered accountant Girish Ahuja, is scheduled to meet on July 13 to deliberate on comments which it has received from various stakeholders. The revenue department, according to sources, is of the view that MAT is not applicable on FIIs and the notices were sent to them following a verdict by the Authority of Advance Ruling (AAR).

In 2012, AAR directed Castleton to pay MAT in India on their book profits when it transferred shares from a Mauritius entity to a Singapore entity.

The Associated Chambers of Commerce and Industry, in its representation to committee said government should issue a clarification that MAT provisions were never intended and do not apply to FIIs/foreign portfolio investors.

"It is also requested (that you should) recommend to the Government to direct the Revenue authorities to stay the demand raised on FIIs/FPIs and not to take any coercive action, till the time the MAT issue is resolved.

“The above action would be in accordance with the government's intention of providing a non-adversarial and stable tax regime to the taxpayer in India,” the chamber said.

Although the Shah panel has one-year term, sources said the committee would submit its report on the MAT issue much earlier as the Finance Ministry is keen that it gives its recommendations “expeditiously”.

The Shah Committee has been entrusted with the task of examining MAT notices to the Foreign Institutional Investors (FIIs) for the period prior to April 1, 2015.

The Income Tax Department had sent notices to 68 foreign institutional investors (FIIs) demanding Rs 602.83 crore as MAT dues of previous years. This has raked up a big controversy, with FIIs moving higher court challenging the MAT demand.

Finance Minister Arun Jaitley in Budget 2015-16 has exempted FIIs from paying MAT with effect from April 1, 2015.

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.