Submissions to the High Level Committee Headed by Justice AP Shah o Examine the Matter Relating to Levy of MAP on FIIs

A study of the legal basis for the levy of Minimum Alternate Tax on Foreign Institutional Investors

The High Level Committee headed by Justice (Retd) AP Shah was set up by the Central Government to examine the issue of whether “Minimum Alternate Tax” could be imposed upon Foreign Institutional Investors/Foreign Portfolio Investors (FIIs) for transactions prior to 01st April, 2015.

In order to assist the HLC on the main legal issues in this matter, Vidhi sent in its submissions to the HLC and presented its views as well. Subsequently, the HLC also sought our views on two topics related to to the issue, specifically concerning the interpretation and effect of the amendment to the Income Tax Act, 1961 in 2015.

In our submissions, we have taken the view that the MAT cannot be imposed on FIIs as this would be contrary to the legislative history behind the MAT, the provisions of the Double Taxation Avoidance Agreements India is bound by and also established judicial precedent. We have also distinguished those cases which have taken the view that MAT can be imposed on FIIs, and pointed out the flawed basis on which they have been rendered.

In our supplementary submissions, we have also interpreted the scope of the term “place of business” and examined the effect of the introduction of the amendment to Section 115JB of the Income Tax Act, 1961 by Finance Act, 2015.  In our view, the position of law on these issues only fortify our earlier conclusion that the imposition of MAT on FIIs prior to 1st April, 2015 would not be permissible under Indian law.

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