(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi,

the 21st November, 2016

INCOME-TAX

S.O. 3498(E).—In exercise of the powers conferred by section 295 read with section 9A of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. These rules may be called the Income-tax ( 32nd Amendment) Rules, 2016.

2. In the Income-tax Rules, 1962, in rule 10V,-

i) in sub-rule (1), in clause (c), after the words “has been entered into”, the words “or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf” shall be inserted with effect from the date of their publication in the Official Gazette;

(ii) after sub-rule (10), the following sub-rules shall be inserted, and shall be deemed to have been inserted with effect from the 15th day of March, 2016, namely:-

“(11) For the purposes of clause (a) of sub-section (4) of section 9A, a fund manager shall not be considered to be a connected person of the fund merely for the reason that the fund manager is undertaking fund management activity of the said fund.

(12) For the purposes of clause (d) of sub-section (4) of section 9A, any remuneration paid to the fund manager, by the fund, which is in the nature of fixed charge and not dependent on the income or profits derived by the fund from the fund management activity undertaken by the fund manager shall not be included in the profits referred to in the said clause, if the conditions specified in clause (m) of sub-section (3) of section 9A are satisfied and such fixed charge has been agreed by the fund manager in writing at the beginning of the relevant fund management activity .”.

[Notification No. 106 /2016/ F. No. 142/15/2015-TPL]

NIRAJ KUMAR,

Under Secy. (Tax Policy & Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969(E), dated 26th March, 1962 and was last amended by notification number G.S.R.1073(E), dated 16th November, 2016.

Form No.3CEJ – Audit Report u/s 9A (Arm’s length price for remuneration paid by an eligible investment fund to the fund manager) and Form No.3CEK – Annual statement u/s 9A are available for e-Filing. Relevant notification is Notification No. 14/2016 [F.No. 142/15/2015-TPL]  dt. 15th March, 2016.

The fund manager shall, in addition to any report required to be furnished by it under section 92E, obtain a report from the accountant in respect of activity undertaken for the fund and furnish such report on or before the specified date in the Form No. 3CEJ duly verified by such accountant in the manner indicated therein and all the provisions of the Act shall apply as if it is a report to be furnished under section 92E.

Explanation.- For the purposes of this sub-rule “specified date” shall have the same meaning as assigned to “due date” in the Explanation 2 below sub-section (1) of section 139.

Statement to be furnished by the fund.- (1) The statement required to be furnished under sub-section (5) of section 9A shall be furnished for every financial year by the eligible investment fund in Form No.3CEK duly verified in the manner indicated therein, to the Assessing Officer who has the jurisdiction over the fund or would have had the jurisdiction had such fund been assessable to tax in India but for the provision of section 9A.

(2) The annual statement referred to in sub-rule (1) shall be furnished electronically under digital signature.

Download Complete Notification on eligible investment fund under Section 9A 

DATED 6-5-2016

In exercise of the powers conferred by sub-rule (4) of rule 10VA of the Income-tax Rules, 1962, read with section 9A of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby notifies the following Committee for the purposes of the said sub-rule:—

2. This may be brought to the notice of all concerned.

Section 9A of the Income-tax Act, 1961 (the Act) provides for special taxation regime with effect from 01.04.2016 to facilitate location of fund managers of off shore funds in India. Under this regime, the fund management activity carried-out through an eligible fund manager in India by an eligible investment fund does not constitute business connection in India of the fund and also does not lead to the residence of the fund in India.

The Rules for operationalisation of the provisions of section 9A of the Act have been inserted in the Income-tax Rules, 1961 (the Rules) vide Notification No. SO 1101(E) dated 15.03.2016. These rules, inter alia, provide for:

• A pre-approval mechanism under which a fund can seek approval at its option from CBDT and once approved, benefit of section 9A would not be denied unless approval is withdrawn under limited circumstances.
• Determination of number of members and the participation interest in the fund by looking through the entity where the investment in the fund has been made directly by an institutional entity.
• Relaxation from investor diversification condition in the period of eighteen months or final closing of the fund whichever is earlier, in setting up phase of the fund and in one year period in the winding up phase of the fund.
• Eligibility of the fund will not be impacted in case of temporary non-fulfilment of investor diversification conditions for period up to 90 days.
• Eligibility of the fund will not be impacted in case of any delay in furnishing the statement  of activity, if delay does not exceed a period of ninety days.
• A fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds twenty six percent of voting right.
• The eligibility of the fund will be impacted only if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm’s length price for a period of three previous years in succession; or for any three out of the preceding four previous years. A chance transfer pricing adjustment will not impact the eligibility.

Notification No. SO 1101(E) dated 15.03.2016 is available on the website of the Income Tax Department: www.incometaxindia.gov.in.