APPLICABILITY OF MAT ON FOREIGN COMPANIES FOR THE PERIOD PRIOR TO 01.04.2015

Under the existing provisions of Section 115JB, if tax payable under the Income Tax Act is lower than 18.5% of the book profits, then such assessee shall be liable to pay taxes at the rate of 18.5% of the book profits.

There were issues whether the above provisions shall be applicable to Foreign Institutional Investors who do not have Permanent Establishment (PE) in India

The Finance Act, 2015 sought to amend this position, however the same was done only with prospective effect i.e. from A Y 2016-17.

It is proposed that with effect from 01.04.2001, the provisions of MAT shall not apply to a Foreign Company if either of the following conditions is satisfied:

-The foreign company is a resident of a country with which India has a valid DTAA and the foreign company does not have a PE in India pursuant to the said DTAA; or

-The foreign company is a resident of a country with which India does not have a valid DTAA and foreign company is not required to seek registration under any law for the time being in force in relation to companies.