India’s reputation as foreign investment friendly nation at stake. Know why
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As per a news report by The Economic Times, five FPIs have teamed up to challenge the applicability of minimum alternate tax (MAT) to capital gains arising from trading in stocks and bonds. The FPIs plan to file a writ petition in the
ET could not ascertain the names of the five FPIs and the quantum of MAT demand. However, demands ranging from Rs 1 crore to Rs 50 crore have been raised by taxmen in draft assessment orders to FPIs at the end of last month.
Earlier, in a statement that had caused considerable consternation, the
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The news report by the financial daily reads, the dispute, which has damaged India's international reputation, flared up when the I-T department started sending notices to FPIs about six months ago asking them to pay MAT for the financial year 2011-12. Many tax experts, ET spoke to said MAT cannot be applied to an entity that doesn't have a so-called permanent establishment in the country.
By March 31, assessing officers had sent draft assessment orders to FPIs asking them to pay MAT. Subsequently, demands were raised for two more years — FY10 and FY11 — in the first week of April. Indian income-tax laws allow assessing officers to go back seven years in the hunt for previous taxes.
During a conference call last Wednesday, Revenue Secretary
A day later, CBDT issued a circular instructing tax officers that decisions should be taken in "...all cases of foreign institutional investors seeking treaty benefits under the provisions of respective DTAAs, decisions may be taken on such claims within one month from the date such claim is filed". Many tax experts have dubbed this order vague since it doesn't mention the word MAT or tell tax officers what action should be taken in this regard.
(Image: Reuters)
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