Markets likely to cheer Bombay HC's decision to stay Aberdeen tax notice

MUMBAI: Stock markets may cheer the Bombay High Court's move to stay the income tax department's decision to impose minimum alternate tax (MAT) on Aberdeen Global Emerging Markets. But, brokers and analysts do not expect the move to spark a sharp rally as the court had issued a stay on technical grounds.

"I would say it's a step in the right direction. But while a stay order will have a positive influence, a conclusion on FII tax issue can only be drawn once the court gives its final verdict," said UR Bhat, managing director at Dalton Capital.

The stay granted to Aberdeen could come as a relief to other foreign investors who have also challenged the tax office's decision on MAT. The court will hear the petitions on Wednesday.


The five other entities that have moved the court against the tax department's MAT notice are National Westminster Bank, First State Asia Pacific Sustainability Fund, First State Indian Subcontinent Fund, First State Global Emerging Market Sustainability, and BNP Paribas L1.

"Let's hope that the income tax department won't raise further tax notices to FIIs post this stay order by Bombay High Court. Markets will definitely feel somewhat relieved," said Nirmal Jain, chairman, IIFL Group.

The BSE Sensex ended 50 points lower to close at 27,440 on Tuesday, after jumping 479 points on Monday.

According to the latest news reports, the tax department has issued demand notices to the tune of $1 billion to foreign portfolio investors (FPIs). A section of the market believes the issue has been blown out of proportion. "I do not think MAT is as big an issue as it's being made out to be," said Adrian Mowat, chief emerging market and Asian equity strategist at JP Morgan in an earlier interview to ET NOW. "It may be an excuse to take money out of India."

Foreign institutional investors (FIIs) have sold Indian shares in 10 out of past 12 trading sessions.