MAT- Applicability to Foreign Company:
- Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 presented originally proposed that long-term capital gains and short-term capital gains (on which STT is paid) arising to FIIs would be excluded from the chargeability of MAT. Further, expenditures, if any, debited to the profit and loss account, corresponding to such income would also added back to the book profit for the purpose of computation of MAT.
(The impact of such proposal would be that foreign companies would be liable to pay MAT even on that income which was exempt from tax by virtue of DTAAs or Income-tax Act.)
- New Change:
Finance Bill, 2015 as passed by LokSabha proposes to provide relief from MAT to foreign companies as well. Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company has been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited to the profit loss account, corresponding to such income shall also added back to the book profit for the purpose of computation of MAT.
Business Trust (SPV) related:
The Finance (No. 2) Act, 2014 inserted clause (xvii) in Section 47 to provide that transfer of share of special purposes vehicle ('SPV') to a business trust in exchange of units allotted by that trust to the transferor shall not be regarded as transfer, thus, no capital gain would arise on such transaction.
- Original Proposal in Finance Bill, 2015:
Finance Bill, 2015 as passed by LokSabha proposes to exclude from chargeability of MAT any notional loss arising from transfer of asset or notional loss arising from change in carrying amount of units(units allotted by the business trust on transfer of shares of SPV to a business trust ) and actual loss from transfer of said units shall be added back to the book prof it for the purpose of computation of MAT.
- New Change:
A new clause is proposed to be inserted to re-compute the loss from transfer of said units which shall be reduced from the book profit. It is proposed that the amount of loss from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.
Medical Insurance:
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.
New Change:
Accordingly, it is proposed in the Finance Bill, 2015 as passed by the LokSabha that the existing deduction of Rs. 15,000 shall be substituted with Rs. 25,000.
Residential Status of a Company (POEM):
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company (Other than Indian Company) shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).
Ø New Change:
Finance Bill, 2015 as passed by the LokSabha has proposed to omit the words ‘at any time' which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India.
Mandatory Filing of Income by ROR:
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as passed by the LokSabha has proposed mandatory filing of return by a person, being Resident and Ordinarily Resident in India who at any time during the previous year -
(I) Holds any asset, as beneficial owner or otherwise, (including financial interest in any entity) located outside India or has signing authority in any account located outside India; OR
(II) As a beneficiary of any asset (including any financial interest in any entity) located outside India.
Medical Insurance:
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.
New Change:
Accordingly, it is proposed in the Finance Bill, 2015 as passed by the LokSabha that the existing deduction of Rs. 15,000 shall be substituted with Rs. 25,000.
Residential Status of a Company (POEM):
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company (Other than Indian Company) shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).
Ø New Change:
Finance Bill, 2015 as passed by the LokSabha has proposed to omit the words ‘at any time' which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India.
Mandatory Filing of Income by ROR:
Ø Original Proposal in Finance Bill, 2015:
The Finance Bill, 2015 as passed by the LokSabha has proposed mandatory filing of return by a person, being Resident and Ordinarily Resident in India who at any time during the previous year -
(I) Holds any asset, as beneficial owner or otherwise, (including financial interest in any entity) located outside India or has signing authority in any account located outside India; OR
(II) As a beneficiary of any asset (including any financial interest in any entity) located outside India.
This article is contributed by Partners of SBS and Company LLP – Chartered Accountant Company You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
