<div><em><strong>With India already battling the labels of 'tax terrorism', the Centre wants to take no chances this time around, reports Suchetana Ray</strong></em></div><div> </div><div>The Supreme Court on Tuesday (04 August) decided to hear the Castleton case on 29th September, following a request from the Union government seeking 4-5 weeks to study the AP Shah Panel report on the contentious issue of applicability of Minimum Alternate Tax (MAT) on foreign portfolio investors.<br><br>This is the case involving Mauritius-based Castleton Investments Limited that had approached the Supreme Court against a 2012 ruling by the Authority of Advance Ruling (AAR), which had said the company would have to pay MAT on capital gains arising from sale of shares.</div><div> </div><div>The controversy surrounding MAT hit the government earlier this year, as the revenue department sent out demand notices to FPIs for paying MAT, based on the AAR verdict of 2012.</div><div> </div><div>Foreign investors have always contended that MAT is not applicable on them and have also moved the court challenging the tax demands.</div><div> </div><div>Though, finance minister Arun Jaitley in his Budget for FY16 exempted FPIs from paying MAT from 1st April 2015, but the issue of coughing up this tax till March 2015 remained unresolved. With this tax controversy threatening the Modi government's promise of a non-adversarial tax regime in India, Jaitley had announced the formation of the three-member AP Shah Panel to be headed by Justice AP Shah in May this year.<br><br>The Shah Panel submitted its report to the finance ministry on 24th July, reportedly advising the government that MAT is not applicable on FPIs. However, sources suggest that this report which is yet to be made public by the government, has also supported the revenue department saying that they had to serve the demand notices as their hands were tied by the AAR verdict.</div><div> </div><div>MAT was introduced by P Chidambaram as finance minister in 2007, as a levy on book profits from stopping domestic companies from evading tax.</div><div> </div><div>Sources close to the attorney general say that, "the government has sought time from the Supreme Court to closely study the AP Shah Panel report. Tax demands have already been served and there are legalities involved." So far, 68 notices have been served by the tax authorities and Rs 680 crore has been demanded under MAT from FPIs. With India already battling the labels of tax terrorism, the government wants to take no chances this time around.</div>
