The income tax department in India has shot off notices in 68 FIIs for payment of Minimum Alternate Tax (MAT) dues worth Rs 6.02 billion, minister of state for finance Jayant Sinha said. “The applicability of MAT provisions is a legal issue and wherever the cases require application of MAT provisions, the same is being done,” Sinha told Lok Sabha.
He was asked whether the income tax department had issued notices to 100 FIIs for tax dues totalling $5-6 billion. Sinha said notices were issued only in 68 cases, raising a tax demand of Rs 6.02 billion.
Several FII were facing tax demand that adds up to nearly Rs 400 billion after the government decided to levy MAT on capital gains. “FIIs went to a tribunal, which is called Authority for Advance Rulings (against levy of 20% Minimum Alternate Tax on capital gains). They got a judgment against themselves... So, the tribunal has decided against them. The amount involved is Rs 400 billion. I can change the face of India's irrigation with that Rs 400 billion,” finance minister Jaitley had told a television channel.
The issue has led to a bitter tussle between the government and the overseas investors. The government sought to calm jittery FIIs and clarified that MAT on capital gains made by overseas funds in Indian stock markets will not be applicable, if the money is routed through countries such as Mauritius, Singapore and others, with which India has signed double taxation avoidance agreements (DTAA). But, the finance ministry has refused to climb down from its stand on withdrawing MAT notices retrospectively and has suggested that FIIs affected by the recent notices should approach the Supreme Court, where a case already been filed. The government has decided to withdraw MAT on capital gains from the current financial year and unveiled the measure in the February budget. The foreign funds have said the notices should be withdrawn and have argued that they are not liable to pay the levy.
