Wednesday, 30 September 2015

Supreme Court disposes off the Castleton's SLP against AAR Ruling on MAT

The Government had recently decided1 to amend the income tax law to clarify non-applicability of Minimum Alternate Tax ('MAT') provisions for the period prior to April 01, 2015 on:

  • Foreign Portfolio Investors (FPIs) that do not have place of business in India and
  • Other foreign companies that do not have place of business in India or are not required to seek registration under the Indian Companies Act.

Today, a Special Leave Petition against the Authority for Advance Rulings' ruling in the Castleton2 case (which was the root cause of the MAT controversy) came up for hearing before the Hon'ble Supreme Court. The Attorney General representing the Government of India stated before the Court that the Government will abide by its aforesaid decision against the levy of MAT.

In light of the above, the Supreme Court disposed off the Special Leave Petition filed by Castleton.

TBM Comment:

The decision of the Supreme Court is a welcome move and it effectively puts to rest the entire controversy around levy of MAT on foreign companies (including FPIs) investing in India.

We may, however, have to wait and see how the field level officers respond to this development. Will they continue to wait for an amendment in the income tax law or will they take cognizance of this development and start disposing of the pending appeals and drop off the proposed MAT levy?

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