2015 (10) TMI 406 - SC - Income Tax

Applicability of Section 115JB in respect of foreign company which does not have any Permanent Establishment (PE) in India - Held that - A circular dated 02.09.2015 issued by the Central Board of Direct Taxes, Ministry of Finance, Government of India 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 01.04.2015. - An appropriate amendment to the Income Tax Act in this regard will be carried out - Appeals disposed of.

Summary

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.