(A.K. Sikri and Rohinton Fali Nariman, JJ.)
Castleton Investment Limited Smithkline Beecham Port Louis Limited ____________________________ Appellant
v.
Director of Income Tax (International Taxation) __________ Respondent
Civil Appeals No. 4559 of 2013 with No. 4560 of 2013, decided on September 30, 2015
The Judgement of the court was delivered by
Judgment
1. Interlocutory application for intervention is allowed. In these appeals the order of the Authority for Advance Rulings (Income Tax), New Delhi (hereinafter referred to as “AAR”), passed on 14-8-20121, is questioned. The basic issue, which is raised, pertains to the applicability of Section 115-JB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) in respect of foreign company which does not have any permanent establishment (PE) in India.
2. Mr. Harish Salve, learned Senior Counsel appearing for the appellants, has brought to our notice a Circular dated 2-9-20152, issued by the Central Board of Direct Taxes, Ministry of Finance, Government of India. It states that minimum alternate tax (MAT) provisions will not be available to FIIs and FPIs not having the business/permanent establishment in India for the period prior to 1-4-2015. We reproduce hereinbelow the said circular in entirety2: (ITR p. 80)
“Subject: Report on applicability of minimum alternate tax (MAT) on FIIs/FPIs for the period prior to 1-4-2015 and acceptance of the Government thereof—reg.
A Committee on direct tax matters chaired by Justice A.P. Shah was constituted to examine the issue of applicability of minimum alternate tax (‘MAT’) on FIIs/FPIs for the period prior to 1-4-2015. The Committee has submitted its final report to the Government on 25-8-2015. The Committee has recommended that Section 115-JB of the Income Tax Act, 1961 (‘the Act’) may be amended to clarify the inapplicability of the provisions of Section 115-JB to FIIs/FPIs having no permanent establishment (PE)/place of business in India. The Government has accepted the said recommendation and it has been decided to carry out appropriate amendment in the Act so as to prescribe that MAT provisions will not be applicable to FIIs/FPIs not having a place of business/permanent establishment in India, for the period prior to 1-4-2015.
The field authorities are accordingly advised to take into consideration the above position and keep in abeyance, for the time being, the pending assessment proceedings in cases of FIIs/FPIs involving the above issue. They are further advised not to pursue the recovery of outstanding demands, if any, in such cases.”
3. This is followed by Press Release dated 24-9-20153, in which two alternatives are mentioned when the provisions of Section 115-JB of the Act shall not be applicable to a foreign company under certain circumstances. It reads as under3: (ITR p. 140)
“Subject: Applicability of minimum alternate tax (MAT) on foreign companies having no permanent establishment in India—regarding
Issues relating to taxation of foreign companies, having no permanent establishment in India, have been under consideration of the Government. In this regard, the Government has already clarified the inapplicability of MAT provisions to FIIs/FPIs.
The Government has now considered the issue of applicability of MAT under Section 115-JB of the Income Tax Act to foreign companies having no place of business/permanent establishment in India.
After due consideration of the various aspects of the matter, the Government has decided that with effect from 1-4-2001, the provisions of Section 115-JB shall not be applicable to a foreign company if—
(i) the foreign company is a resident of a country having DTAA with India and such foreign company does not have a permanent establishment within the definition of the term in the relevant DTAA, or
(ii) the foreign company is a resident of a country which does not have a DTAA with India and such foreign company is not required to seek registration under Section 592 of the Companies Act, 1956, or Section 380 of the Companies Act, 2013.
An appropriate amendment to the Income Tax Act in this regard will be carried out.”
4. The learned Attorney General has made a statement at the Bar that the Government would abide by the decision which has been taken in the aforesaid Circular dated 2-9-20152 and Press Release dated 24-9-20153.
5. The learned counsel for the parties agree that in view of this submission, the present appeals can be disposed of in terms thereof. Ordered accordingly.
6. We may place on record that one more issue has been decided in the impugned opinion of the AAR which relates to the applicability of the transfer pricing provisions i.e. Sections 90-95 to the foreign companies. However, Mr. Salve submits that since there is another press release on 28-1-2015, the appellants are not pressing that issue.
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1 Castleton Investment Ltd., In re, 2012 SCC OnLine AAR 38 : (2012) 348 ITR 537
2 (2015) 377 ITR (St) 80
3 (2015) 377 ITR (St) 140
