Aberdeen Capital, a Foreign Investor that had received a notice for Minimum Alternate Tax (MAT) for income on capital gains in past years, has managed to get a stay order from the Bombay High Court.
This is a technical stay. It’s been given because the concept is supposed to be:
1) IT department passes a draft order
2) Aberdeen would have got 30 days to refute
3) Only then is final order passed.
Since this was a final order without a draft, it goes into the “stay” bin. Obviously this can be fixed by going back, issuing a draft order and going through the motions to reach the same point in 30 days.
This is largely a non-issue by now, with the final decision that must come from the court (since the tax department will keep demanding the tax).
See also: FIIs get hit by massive MAT Demand.
In summary, FIIs have been told that even though long term capital gains are not taxed in India, MAT applies. MAT is about 20%. This supposedly applies for past years as well, so any FII that has booked profits in previous years will be liable to pay.
The government has clarified that this doesn’t apply to investors from Mauritius or Singapore or any country we have a special treaty with. But it does apply to non-treaty origin funds, and it applies retrospectively since the demand is now for previous years. The final call on that aspect will be taken by courts. Oh, such fun.
