Finance Ministry gives up on tax row
Mumbai: The equity markets snapped their five-day losing streak following a late hour surge in buying of blue-chip stocks on reports that the minimum alternate tax (MAT) would not be levied on overseas investors coming through those jurisdictions with which India has a double taxation avoidance agreement (DTAA). After trading in the negative zone for most part of the day amid concerns about the levy of MAT and weak corporate earnings, the Sensex surged over 500 points from its days low to end the trading session at 27,890.13, gaining 214.09 points or 0.77 per cent. The Nifty gained 51.95 points or 0.62 per cent to end the day at 8,429.70.
The issue of MAT had caused widespread resentment among the overseas investors for the past few days with many of them cutting their exposure to Indian markets. In the last five trading sessions, foreign portfolio investors (FPI) have offloaded shares and debt instruments worth $1 billion. According to the provisional data released by the stock exchanges, overseas investors sold shares worth Rs 910.15 crore on Wednesday.
While the Budget 2015 has stated that MAT will not be levied on FPIs with effect from April 1, income tax authorities had slapped notices on about 100 FPIs demanding the payment of MAT to the tune of Rs 40,000 crore for their income for the earlier years. “Foreign portfolio investors had created huge short positions in the futures and options segment. Those positions got covered as soon as the government clarified that MAT for prior years would not be applicable for treaty protected cases,” said Udaya Narayan Dubey, vice-president, institutional desk at R.K. Global.
“This is indeed a positive announcement. While re-assessment proceedings have been initiated, it would mean that if these announcements are given effect to, MAT should not apply to treaty protected cases,” said Sameer Gupta, tax leader for financial services, E&Y. The broader market was still weak with 1,433 stocks traded on the Bombay Stock Exchange ending the day in red as compared to 1,324 stocks that advanced.
