Business
What's the quantum of tax sought from foreign funds?
New Delhi, April 24
Were the estimates of tax
demands from foreign funds, raised by the Central Board of Direct Taxes
(CBDT) towards capital gains made by them in the past, grossly
exaggerated? It seems so from an answer given by Minister of State for
Finance Jayant Sinha on Friday.
"Tax notices have been issued in
68 cases of overseas funds to bring to tax the book profits as per
minimum alternate tax (MAT) provisions under Section 115JB of the Income
Tax Act, 1961," the minister replied in writing to a question in the
Lok Sabha.
"So far, total tax demand of Rs.608 crore has been
raised," he said in reply to a question, that sought information on
whether such notices were issued for tax evasion, adding that this was a
legal issue and provisions were being applied accordingly.
Over
the past week, however, estimate of the quantum of tax demand has been
some Rs.40,000 crore (around $3-$4 billion) from some 50-150 foreign
funds -- a matter that has been raised with the top brass of the finance
ministry by all stakeholders and foreign investors.
The
statement from the minister came even as the direct tax board on Friday
wrote to all income tax principal chief commissioners, that cases where
foreign funds have claimed tax benefits, using the treaties with other
countries, must be dealt with fast.
"Since the issue involved is
limited, such claims should be decided expeditiously. Accordingly, it
has been decided that all cases of foreign institutional investors
seeking treaty benefits under the provisions of tax treaties may be
taken on such claims within a month."
Reacting to the
development, Sunil Shah, a partner with consultants Deloitte Haskins and
Sells, said the recent debate on tax demands on some foreign funds
under minimum alternate tax, as also the reopening of cases pertaining
to the past, needed government clarification.
"Otherwise it will
need to be resolved by the courts," he said, adding there were several
foreign portfolio investors who qualified for benefits under the double
taxation avoidance treaties that India had entered into with other
countries.
"This is a welcome step that will clear the
uncertainty for some categories of foreign funds. For those who do not
have treaty protection, the controversy would continue till it is
settled either by the government or by the courts,†Shah said referring
to the tax board circular.
Minister of State for Finance Sinha
has already assured foreign funds, during a meeting with them on
Thursday, that the government was already considering some amendments to
clarify its position on minimum alternate tax rules with retrospective
effect for their benefit.