In a big relief to Castleton Investments, the Supreme Court on Wednesday disposed of the company’s SLP after the Centre told the court that it stood by its circular exempting foreign investors from paying minimum alternate tax (MAT) if they didn’t have a permanent place of business in India.
The case had been followed keenly by foreign investors, who were jittery on the outcome and the impact it would have on them. But with Attorney-General Mukul Rohatgi assuring the apex court that the Centre would stand by its decision to exempt foreign companies from MAT if they don’t have a place of business in India, the apex court noted that no dispute remains in the Castleton case, and disposed of the Special Leave Petition.
Mauritius-based Castleton had filed the SLP challenging a 2012 ruling of the Authority for Advance Ruling (AAR) on MAT applicability. The 2012 AAR ruling had said Castleton would have to pay MAT on capital gains arising from sale of shares.
Move welcomed This puts to rest the entire controversy around the levy of MAT on foreign companies (including foreign portfolio investors) investing in India, say tax experts.
As expected after the issue of the CBDT press release dated September 24, the government has decided not to pursue the Castleton case before the Supreme Court, Ketan Dalal, Senior tax partner, PwC India, told BusinessLine . This is a welcome development and a manifestation of the government's intent to bring a logical close to this controversy, Dalal added.
Amit Maheshwari, Partner, Ashok Maheshwary & Associates, a Chartered Accountancy firm, said the government’s decision is a welcome move to close the loop, prevent unnecessary litigation, and provide a sense of certainty to the tax system.
“Walking the talk in tax litigation definitely sends a positive signal. Continuing clarity, which started with not appealing the Shell and Vodafone share valuation case in the Supreme Court, is signalling positive intent to provide maximum certainty and create a non-adversarial tax regime for foreign investors,” he said.
Rakesh Nangia, Managing Partner, Nangia & Co, another CA firm, said the apex court decision had brought the curtains down on the MAT controversy.
In fact, after the government issued the circular, the issue was only academic and such foreign companies can now breathe easy, he added.