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Govt. Notifies Norway’s Norfund as SWF for Tax Exemption u/s 10(23FE)

govt-notifies-norways-norfund-as-swf-for-tax-exemption-us-10-23fe

CBDT vide Notification No. 33/2021 dated 19.04.2021 notified the Norfund, Government of Norway, as Sovereign Wealth Fund (SWF) for availing tax exemption under section 10(23FE) of the Income Tax Act, 1961 (“Act”).


Union Budget 2020 has introduced a new section 10(23FE) in order to promote investment of sovereign wealth funds.


Norfund shall be eligible to claim exemption under said section in respect of investment made in India on or before 31-03-2024 subject to prescribed conditions.



The fund has been provided 100% income-tax exemption on any income from interest, dividend and long-term capital gains arising from an investment made by it on or after 19-04-2021 but on or before the 31-03-2024 shall be entitled to the exemption subject to the fulfilment of specified conditions therein. 


Earlier, MIC Redwood 1 RSC Limited of Abu Dhabi was notified as SWF for availing this exemption under the newly enacted provisions by the Finance Act, 2020 under section 10(23FE).


In order to incentivise long-term investment by the SWFs of the foreign governments in the priority sectors, Finance Act, 2020 has amended the Income Tax Act, 1961 and inserted a new section 10(23FE) to grant  100% income-tax exemption to the income of a notified SWF in respect of its investment made in the specified infrastructure sectors on or before 31-03-2021. 


The notification prescribes the following conditions which the fund will have to fulfil to get the exemption-


1. The SWF has to file its return of income in India,

2. The SWF shall get its books of account audited by a Chartered Accountant.

3. The Fund shall furnish a quarterly statement electronically in Form II in respect of each investment made by it during the said quarter

4. The Fund shall maintain a segmented account of income and expenditure in respect of such investment which qualifies for exemption under section 10(23FE)

5. the assessee shall continue to be owned and controlled, directly or indirectly, by the Government of Norway and continue to be regulated under the law of the Government of Norway

6. The earnings of the assessee shall be credited either to the account of the Government of Norway or to any other account designated by that Government 

7. The assessee shall not have any loans or borrowings directly or indirectly, for the purposes of making investment in India

8. The asset of the assessee shall vest in the Government of Norway upon dissolution

9. The assessee  shall not participate in the day to day operations of  investee 


The notification categorically states that violation of any of the conditions as stipulated in section 10(23FE) and this notification shall render the assessee ineligible for the tax exemption.


Read the full text of Notification No. 33/2021 dated 19.04.2021 on notifying Norway based Norfund for Tax Exemption u/s 10(23FE)


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 19th April, 2021

(INCOME-TAX)

S.O. 1661(E).—In exercise of the powers conferred by sub-clause (vi) of clause (b) of the Explanation 1 to clause (23FE) of section 10 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the “Act”), the Central Government hereby specifies the sovereign wealth fund, namely, the Norfund, Government of Norway, (hereinafter referred to as “the assessee”) as the specified person for the purposes of the said clause in respect of the investment made by it in India on or after the date of publication of this notification in the Official Gazette but on or before the 31st day of March, 2024 (hereinafter referred to as “said investments”) subject to the fulfilment of the following conditions, namely:-

 

(i) the assessee shall file return of income, for all the relevant previous years falling within the period beginning from the date in which the said investment has been made and ending on the date on which such investment is liquidated, on or before the due date specified for furnishing the return of income under sub-section (1) of section 139 of the Act;

(ii) the assessee shall get its books of account audited for the previous years referred to in clause (i) by any accountant specified in the Explanation below sub-section (2) of section 288 of the Act and furnish the Audit Report in the format annexed as Annexure to this notification herewith at least one month prior to the due date specified for furnishing the return of income under sub-section (1) of section 139 of the Act;

(iii) the assessee shall furnish a quarterly statement within one month from the end of each quarter electronically in Form II as annexed to the Circular No 15 of 2020, dated the 22nd July, 2020 with F. No. 370142/26/2020- TPL, issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (Tax Policy and Legislation Division), in respect of each investment made by it during the said quarter;

(iv) the assessee shall maintain a segmented account of income and expenditure in respect of such investment which qualifies for exemption under clause (23FE) of section 10 of the Act;

(v) the assessee shall continue to be owned and controlled, directly or indirectly, by the Government of Norway and at no point of time any other person should have any ownership or control, directly or indirectly, in the assessee;

(vi) the assessee shall continue to be regulated under the law of the Government of Norway;

(vii) the earnings of the assessee shall be credited either to the account of the Government of Norway or to any other account designated by that Government so that no portion of the earnings inures to any private person barring any payment made to creditors or depositors for loan or borrowing [as defined in sub-clause (a) of clause (ii) of Explanation 2 to clause (23FE) of section 10 of the Act] taken for the purposes other than for making investment in India;

(viii) the assessee shall not have any loans or borrowings [as defined in sub-clause (a) of clause (ii) of Explanation 2 to clause (23FE) of section 10 of the Act], directly or indirectly, for the purposes of making investment in India;

(ix) the asset of the assessee shall vest in the Government of Norway upon dissolution barring any payment made to creditors or depositors for loan taken or borrowing for the purposes other than for making investment in India; and

(x) the assessee shall not participate in the day to day operations of investee [as defined in clause (i) of Explanation 2 to clause (23FE) of section 10 of the Act] but the monitoring mechanism to protect the investment with the investee including the right to appoint directors or executive director shall not be considered as participation in the day to day operations of the investee.

2. Violation of any of the conditions as stipulated in the said clause (23FE) and this notification shall render the assessee ineligible for the tax exemption.

3. This notification shall come into force from the date of its publication in the Official Gazette.

 

ANNEXURE 

Audit report to be filed by the Sovereign Wealth Fund claiming exemption under clause (23FE) of section 10 of the Income -tax Act, 1961 

Part I

*I/we report that the statutory audit of M/s. ………...........…………………. (Name and address of the assessee with Permanent Account Number or Aadhaar Number), the particulars of which are given in Part II was conducted by *me/ us/ M/s. …………………………………………..………. as per the requirement under the Notification No …../…… dated ……… published in the Official Gazette on ……....

2. In *my/ our opinion and to the best of *my/ our information and according to examination of books of account including other relevant documents and explanations given to *me/us, it is certified that the assessee *has/ has not complied with the conditions as laid down under clause (23FE) of section 10 of the Income-tax Act, 1961 and those provided in the said notification specifying the assessee being the Sovereign Wealth Fund as specified person for the purposes of claiming exemption under the said clause (23FE).

2.1 *The conditions not complied with by the assessee are as under:-

(a) …………………………….…………………………….………………………………

(b) …………………………….…………………………….………………………………

 

3. In *my/our opinion and to the best of *my/ our information and according to examination of books of account including other relevant documents and explanations given to *me/us, the particulars given in the Part II are true and correct subject to the following observations/qualifications, if any, namely:-

(a) …………………………….…………………………….………………………………

(b) …………………………….…………………………….………………………………

Part II 

5. Name of the Assessee :

6. PAN/ AADHAAR :

7. Previous Year :

8. Total Income of the Assessee during the previous year :

9. Total amount of income eligible for exemption under clause (23FE) of section 10 of the Income-tax Act, 1961 (as per details in column 11 of table at item no.6) : 

10. The opening balance (i.e. the closing balance as on the last date of the preceding financial year) of the investment made which is eligible for exemption under clause (23FE) of section 10 is ______________(in rupees) and details of the investment by the Sovereign Wealth Fund (SWF) during the period are as under:

Table

 

Sl.

No.

Date of investment

Amount of investment

Nature

of investment (Instruction 4)

Nature of incom (instruction 5

Amount of income on investment during the year

Details of the entity in which Investment made

Amount of income which is eligible for exemption under clause (23FE) of

section 10 (Attach calculation sheet as per relevant rules)

Nature of entity (instruction 6)

Name

PAN

In case if nature of entity code is 3/4/5, whether the entity has made minimum investment of 50 or75 or 90 percent as required in item (c) or (d) or (e) of sub- clause (iii) of

clause (23FE) of section 10 (Attach calculation sheet as per relevant

rules)

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

1











2

































Total










 

7.*the SWF has not sold any of the investments made for the purposes of exemption under clause (23FE) of section 10 of the Income-tax Act, 1961 before the expiry of three years from the date on which the investment was made in respect of the said exemption/the SWF has sold certain investments made for the purposes of exemption under clause (23FE) of section 10 of the Income-tax Act, 1961 before the expiry of three years from the date on which the investment was made in respect of the said exemption, the details of which are as under:


Table


Sl.

No.

Date of investment

Nature

of investment (Instruction 4)

Nature of income (instruction 5)

Amount of income on investment

during the year

Details of the entity in which

Investment made

Date of sale

Nature of entity (instruction 7)

Name

PAN

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

1.

 

 

 

 

 

 

 

 

2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 



8. The SWF satisfies all the conditions required for the purposes of exemption under clause (23FE) of section 10 of the Income-tax Act, 1961, that is, -


(a)

Whether the government of foreign country wholly owns and controls the SWF, directly or indirectly

Yes/No

(b)

Mention the name of the government of foreign country which owns and controls the SWF, directly or indirectly

 

(c)

Whether the government of foreign country owns and controls the SWF, directly or indirectly

Directly/ Indirectly

(d)

In case if government of foreign country owns and controls the SWF, indirectly give details of the chain of ownership

 

(e)

Name of the law under which the SWF is set up and regulated

 

(f)

Whether the earnings of the said fund are credited either to the account of the Government of that foreign country or to any other account designated by that Government so that no portion of the earnings inures any benefit to any private person barring any payment made to creditors or depositors for loan taken or borrowing for the purposes other than for making investment in India.

Yes/No

(g)

Whether the asset of the said fund vests in the Government of such foreign country upon dissolution barring any payment made to creditors or depositors for loan taken or borrowing for the purposes other than for making investment in India.

Yes/No

(h)

If answer to (f) or (g) is No, then provide the following details:

Name of such private person

Amount of benefit provided during the year

 

(i)

Whether it participates in the day to day operations of any of the investee, as defined in clause

(i) of Explanation 2 to clause (23FE) of section 10, barring any monitoring mechanism to protect the investment with the investee including the right to appoint directors or executive director

Yes/No

(j)

If answer to (i) is yes, then provide the following details:

Name of such investee

PAN of the investee

Amount of investment in such investee at the end of the year

 

(k)

Whether it has complied with the requirement of intimation of the details of investment made by it in India in Form No II issued vide circular No 15/2020 dated 22.07.2020

Yes/No

(l)

Whether it has loans or borrowings, as defined in Explanation 2 to clause (23FE) of section 10, directly or indirectly, for the purposes of making investment in India

Yes/No

(m)

If answer to (l) is yes, then provide the following details:

Name of the person from whom such loan or borrowing has been taken

Amount of loan or borrowing at the beginning of the year

Amount of loan or borrowing received during the year

Amount of loan or borrowing repaid during the year

Amount of loan or borrowing at the end of the year

 

(n)

Whether separate segmented account is maintained for income and investment in respect of investment which qualifies for exemption under clause (23FE) of section 10 of the Act

Yes/No



Place: …………… 


Date: ……………


**(Signature and stamp/ Seal of the signatory) 

Name of the signatory ………………… 

Full address …………………………… 

Membership No……………………… 

UDIN……………………………….. 


Instructions: 1. *Delete whichever is not applicable. 

2. This report is to be given by an accountant as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961. 

3. An “investee” shall have the same meaning as in clause (i) to Explanation 2 to clause (23FE) of section 10 of the Income-tax Act, 1961 and “Loan and borrowing” shall have the same meaning as in sub-clause (a) of clause (ii) of Explanation 2 to clause (23FE) of section 10 of the Income-tax Act, 1961.”. 

4. One of the following codes is to be selected:


Nature of Investment

Code

Debt

1

Equity

2

Preference Shares

3

Others (Please specify)

4


5. One of the following codes is to be selected:


Nature of Income

Code

Interest

1

Dividend

2

Capital Gains

3

Others

4


6. One of the following codes is to be selected:


Nature of entity in which investment is made

Code

Business Trust referred to in item (a) of sub-clause (iii) of clause (23FE) of section 10

1

Company or enterprise or entity referred to in item (b) of sub-clause (iii) of clause (23FE) of section 10

2

Alternative Investment Fund referred to in item (c) of sub-clause (iii) of clause (23FE) of section 10

3

Domestic company referred to in item (d) of sub-clause (iii) of clause (23FE) of section 10

4

Infrastructure Finance Company/Infrastructure Debt Fund-NBFC referred to in item (e) of sub-clause (iii)

of clause (23FE) of section 10

5


[Notification No. 33/2021/ F. No. 370142/6/2021-TPL] 

VIPUL AGARWAL, Director (Tax Policy and Legislation Division)


Download Copy of Notification No. 33/2021 dated 19.04.2021 on notifying Norway’s Norfund as SWF for for Tax Exemption u/s 10(23FE) in pdf format


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CBDT widens the definition of infrastructure under section 10(23FE)

 

CBDT prescribes Form I for getting notified under section 10(23FE)

 

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