Supreme Court: MAT not applicable to foreign investors without PE in India pre-April 1, 2015

The Supreme Court clarified that Minimum Alternate Tax (MAT) provisions do not apply to Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) without a Permanent Establishment in India before April 1, 2015. The decision was based on a circular by the Central Board of Direct Taxes and a Press Release outlining conditions for non-applicability of MAT to foreign companies under Double Tax Avoidance Agreements. The Court disposed of appeals in accordance with these clarifications, providing certainty on tax treatment for foreign companies without a place of business in India.

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Issues:
1. Applicability of Section 115JB of the Income Tax Act, 1961 to foreign companies without Permanent Establishment in India.
2. Decision on the applicability of Minimum Alternate Tax (MAT) provisions to FIIs and FPIs.
3. Clarification on the inapplicability of MAT provisions to foreign companies without a place of business/ permanent establishment in India.
4. Disposal of appeals based on Circular and Press Release decisions.
5. Decision on the applicability of transfer pricing provisions to foreign companies.

Analysis:
1. The primary issue in this case is the applicability of Section 115JB of the Income Tax Act, 1961 to foreign companies without a Permanent Establishment (PE) in India. The circular dated 02.09.2015 issued by the Central Board of Direct Taxes clarified that MAT provisions will not apply to FIIs and FPIs without a business/PE in India before 01.04.2015. This circular was based on the recommendations of the Committee on Direct Tax Matters chaired by Justice A. P. Shah, which suggested amending the Act to exclude MAT provisions for FIIs/FPIs without a PE in India.

2. The judgment further discusses the decision regarding the applicability of MAT provisions to foreign companies without a place of business/PE in India. The Press Release dated 24.09.2015 outlined conditions under which Section 115JB would not apply to foreign companies, such as being a resident of a country with a Double Tax Avoidance Agreement (DTAA) with India and not having a PE as defined in the relevant DTAA.

3. The Attorney General confirmed the government's commitment to follow the decisions in the circular and press release, leading to the disposal of the present appeals in accordance with those decisions. This resolution provided clarity on the tax treatment of foreign companies without a place of business/PE in India.

4. Additionally, the judgment mentions the decision on the applicability of transfer pricing provisions to foreign companies, specifically Sections 90-95. However, the appellants did not press this issue as there was a separate Press Release on 28.01.2015 related to this matter, indicating that it was not a pressing concern in the current appeals.

In conclusion, the Supreme Court's judgment addressed various issues related to the taxation of foreign companies without a PE in India, providing clarity on the applicability of MAT provisions and transfer pricing regulations based on government circulars and press releases.

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