CBDT vide Notification No. 41/2020 dated 30.06.2020 notified that the conditions specified in clauses (e), (f) and (g) of section 9A(3) shall not apply in case of an investment fund set up by a Category-I foreign portfolio investor registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019.
Section 9A of the Income-tax Act provides for a special regime in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India. The benefit under section 9A is available subject to the conditions provided in sub-sections (3), (4) and (5) of the section.
Sub-section (3) of section 9A provides for the conditions for the eligibility of the fund. These conditions, inter alia, are related to residence of fund, corpus, size, investor broad basing, investment diversification and payment of remuneration to fund manager at arm's length. These conditions are specified in clauses (a) to (m) of Section 9A(3).
It is provided that the conditions specified in clauses (e), (f) and (g) of section 9A(3) shall not apply in case of an investment fund set up by the Government or the Central Bank of a foreign State or a sovereign fund, or such other fund as the Central Government may notify in this behalf subject to conditions, if any.
In this context, CBDT has issued the Notification No. 41/2020 dated 30.06.2020 and notified that the conditions specified in clauses (e), (f) and (g) of section 9A(3) shall not apply in case of an investment fund set up by a Category-I foreign portfolio investor registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019.
This notification is made effective retrospectively from 23.09.2019.
Read the full text of the Notification No. 41/2020 dated 30.06.2020 on Section 9A(3).
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th June, 2020
(INCOME–TAX)
S.O. 2148(E).—In exercise of the powers conferred by the proviso to sub-section (3) of section 9A of the Income-tax Act, 1961(43 of 1961), the Central Government hereby notifies that the conditions specified in clauses (e), (f) and (g) of the said sub-section shall not apply in case of an investment fund set up by a Category-I foreign portfolio investor registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992).
2. This notification shall be deemed to have come into force from the 23rd day of September, 2019.
[Notification No. 41/2020/F. No. 142/15/2015-TPL- Part (1)]
NEHA SAHAY, Under Secy. (Tax Policy and Legislation Division)
Explanatory Memorandum: It is hereby certified that no person is being adversely affected by giving retrospective effect to this notification.
Download Copy of Notification No. 41/2020 dated 30.06.2020 on Section 9A(3) in pdf format.
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