Provisions of S. 115JB (MAT) are not applicable to foreign companies that do not have physical presence in India, in the form of an office, branch or a permanent establishment (PE).

Part C : Tribunal & AAR International Tax Decisions

• As part of its global
  restructuring exercise, Timken, a US company (USCO) proposed to transfer
  shares of in an Indian listed company. The proposed transfer was to be through
  stock exchange, and hence, was expected to qualify for exemption from capital
  gains tax in terms of S. 10(38) of the Act.

• The issue raised
  before AAR was whether in absence of any presence in India, USCO was liable to
  pay tax under MAT provisions on capital gains arising from transfer of shares.

• A foreign company
  that has not established a place of business in India is not required to
  prepare its financial statements in accordance with S. 591 r.w. S. 594 of the
  Companies Act.

• The context of the
  MAT regime, the Finance Minister’s speech and the administrative circulars
  indicate that the MAT is not designed to be applicable to a foreign company
  which does not have presence in India.

• The earlier AAR
  ruling holding that MAT is applicable to foreign companies was in the context
  of an entity that was doing business in India and had a PE in India. Such
  foreign company had obligation to comply with the provisions of the Companies
  Act and maintain books of accounts in India and therefore, was liable to MAT.