Bombay HC stays MAT claim against Aberdeen Asset

Tax authorities suffered a setback on Tuesday in their efforts to impose a so-called minimum alternative tax (MAT) on foreign investors, as UK-based Aberdeen Asset Management won temporary relief from a tax bill it was facing.

US and European investor groups last month called for the government to clarify its tax regime for foreigners following surprise attempts by tax inspectors to impose MAT , which some tax experts say could leave international funds and banks with bills of as much as $8 billion.

How much tax do I have to pay? Calculate now

Aberdeen had filed its challenge with the Bombay High Court in response to a claim for a MAT payment of about Rs 20 lakh for one of its funds, said a lawyer involved in the case.

The court granted a stay on the start of any penalty proceedings against Aberdeen by the tax authorities and asked the income tax department to submit its response to Aberdeen's challenge by June 10, the lawyer said, adding the court had scheduled a hearing on the case on June 23.

Although the amount demanded of Aberdeen is relatively small, an official at the London-listed company had told Reuters on Monday it had gone on with the challenge because it believed the claim was unfair.

The local media have reported that some other foreign investors have also initiated legal challenges against MAT claims.

Uncertainty around MAT has built in recent weeks and unsettled foreign investors, sending stock market lower.

Minister of state for finance Jayant Sinha last month said notices had been issued in 68 cases, with a total tax demand of just Rs 602 crore. But Finance Minister Arun Jaitley has estimated claims could eventually stand at as much as Rs 40,000 crore.

Foreign investors in India had paid 15 per cent on short-term listed equity gains, 5 per cent on gains from bonds and nothing on long-term gains, but from late last year many firms received notices from tax inspectors requiring them to pay MAT, potentially bringing tax on these gains to as much as 20 per cent.

The following month Finance Minister Arun Jaitley intervened in his 2015 budget bill to say capital gains made by foreign investors as of April 2015 were exempt from MAT, but that did not resolve the issue given previous gains would still be subject.

(Reuters)