Supreme Court of India(SCI)Ruling on MAT in Castleton Investments Case Wednesday Sep 30,2015

Supreme Court of India Ruling on MAT

In a big relief to Castleton Investments, the Supreme Court on Wednesday Sep 30,2015 disposed of the company’s SLP after the Centre told the court that it stood by its circular exempting foreign investors from paying minimum alternate tax (MAT) if they didn’t have a permanent place of business in India.

The case had been followed keenly by foreign investors, who were jittery on the outcome and the impact it would have on them. But with Attorney-General Mukul Rohatgi assuring the apex court that the Centre would stand by its decision to exempt foreign companies from MAT if they don’t have a place of business in India, the apex court noted that no dispute remains in the Castleton case, and disposed of the Special Leave Petition.

Mauritius-based Castleton had filed the SLP challenging a 2012 ruling of the Authority for Advance Ruling (AAR) on MAT applicability. 

In  August 2012 AAR ruling had said Castleton would have to pay MAT on capital gains arising from sale of shares.

Authority for Advance Ruling(AAR) on Minimum Alternate Tax(MAT)
In August 2012,the Authority for Advance Ruling(AAR)in the case of Castleton Investment Ltd(the applicant)held that transfer of Shares in an Indian Company by a Mauritius Holding Company to Singapore company as part of Internal Re-structuring is not liable to capital gains tax under the Article 13(4) of the India-Mauritius Tax Treaty
The AAR held that since the MAT provisions under the IT ACt,1961(the Act)does not make distinction between an Indian Company and a Foreign Company,MAT provisions are applicable to the foreign companies
Further,the AAR held that the Transpfer Pricing Provisions are applicable to the facts of the present case even though share transfers are not taxable under the Tax Treaty

Ministry of Finance clarifies on MAT

Ending the debate on whether foreign companies will be subject to minimum alternate tax (MAT) provisions, the government on Thursday Sep 24,2015 clarified that the tax regime would not apply to overseas firms not having a permanent establishment in India.

An official statement from the Ministry of Finance said that two categories of companies — foreign companies with no permanent establishment in India but based in countries with which India has a Double Taxation Avoidance Agreement, and those with no place of business here — will not be covered under MAT.

This move follows the recent decision of the government to exempt foreign financial institutions/foreign portfolio investors from MAT.

“After due consideration of the various aspects of the matter, the government has decided that with effect from April 1, 2001, the provisions of Section 115JB shall not be applicable to a foreign company — if the foreign company is a resident of a country having DTAA with India and such foreign company does not have a permanent establishment within the definition of the term in the relevant DTAA, or the foreign company is a resident of a country which does not have a DTAA with India and such foreign company is not required to seek registration under Section 592 of the Companies Act 1956 or Section 380 of the Companies Act 2013,” the statement said.

No retrospective MAT; Govt accepts Shah report

Ending all speculation on the fate of the Minimum Alternate Tax (MAT), Finance Minister Arun Jaitley on Tuesday Sep 01,2015 said the government has accepted the Justice AP Shah panel’s recommendation to amend the Income Tax Act, exempting foreign institutional investors and foreign portfolio investors from MAT on transactions prior to April 1, 2015.