New Delhi : Slapped with Rs 40,000 crore tax demand, foreign portfolio investors today knocked on the doors of the Finance Ministry, but were told to approach courts for any relief even as the government assured them that such demands would not apply to the entities from DTAA countries.
In case of the investors from jurisdictions having Double Taxation Avoidance Agreements (DTAAs) with India, the treaty benefits would over-ride the tax demands, top finance ministry officials told the FIIs in a series of meetings today.
For all other foreign investors, the only remedy left was to challenge the levy of 20 per cent Minimum Alternate Tax (MAT) on capital gains they made in past three years.
While Minister of State for Finance Jayant Sinha met a select group of foreign investors this morning, it was followed by a tele-conference where Revenue Secretary Shaktikanta Das sought to address their concerns.
The meetings came after several representations made by the FIIs against tax demand notices slapped on them. Goldman Sachs, Morgan Stanley, Deutsche Bank, Standard Chartered, Citi, RBS and J P Morgan were among the foreign investors present in the meetings.
According to sources, Das told the investors that MAT will not be applicable to investors hailing from jurisdictions with which India has signed DTAAs on the premise that they would have already paid tax in their own countries.
FIIs can avail of treaty benefits, Das said. After the morning meeting, Sinha said government cannot intervene after judicial body, Authority for Advance Rulings (AAR) order that MAT was payable on capital gains earned by FIIs.
“The problem arose because AAR ruled that MAT is to be applicable. This no longer is a policy issue, but it now is a judicial issue, which has gone to court. So the solution to the past cases of 2-3-4 years… Whether tax is applicable or not, is now a judicial proceeding.
