MAT is applicable to all companies including foreign companies but excluding following foreign companies.

a) Foreign Company incorporated in country outside India or territory outside India and India has Double Tax Avoidance Agreement (DTAA) with that countries and such Foreign Companies does not have any Permanent Establishment in India.

b) Foreign Company incorporated in country outside India or territory outside India and India does not have any Double Tax Avoidance Agreement (DTAA) with that countries and such Foreign Companies are not required to take any registration in India under any Law.

From the above provision we can find that MAT is applicable to all companies including foreign companies and foreign companies are also required to calculate total income and tax according to MAT as well with normal provisions.

But some foreign companies are excluded from their that are given in point (a) and (b) above.

if we discus point (a)

If India has entered into DTAA then business income of foreign company taxable in India if foreign company has Permanent Establishment(PE) in India otherwise business income shall not be taxable in India and provisions of section 9 (business income taxable as per business connection in India) of income tax act 1961 shall be ignored and definition of PE is generally defined in the DTAA it self. so before considering that foreign company has PE in India DTAA between incorporating country or territory of foreign company and India shall be taken into account.

if foreign company has PE in India as per DTAA then MAT will be applicable to that company and tax shall be determined as per normal provisions of income tax and @ 40% or as per section 195JB after specific adjustments on profit or loos shown by the income statement prepared in accordance with general accepted accounting policies applicable on it (W-E-L).

If we discus point (b)

If India does not have DTAA with the country or territory in which foreign company is incorporated and business income of that foreign company is taxable in India if foreign company has business income in India and accordingly provisions of section 9 (if business connection is established in India) of income tax act 1961 shall be applicable.

farther if the foreign company is required to get registered in India according to any law in India then provisions of section 115JB shall be applicable on that company and book profit shall be calculated after adjustment of specific items of section 115JB.

Author Bio

Qualification: Student - CA/CS/CMA
Company: N/A
Location: SILIGURI, West Bengal, IN
Member Since: 21 Jul 2019 | Total Posts: 1

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