CBDT vide Notification No. 80/2022 dated 08.07.2022 in G.S.R. 524(E) through Income-tax (21st Amendment) Rules, 2022 inserted Rule 21AL in the Income-tax Rules, 1962 to prescribe for other conditions required to be fulfilled by ‘Original fund’ for claiming the exemption specified in section 47(viiad) of the Income-tax Act, 1961 (‘Act’).
Section 47(viiad) provides that any transfer by a shareholder or unitholder or interest holder, in a relocation, of a capital asset being a share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund shall not be treated as a transfer for the purpose of capital gains.
"Original Fund" is defined as a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfils certain other prescribed conditions.
As per the newly inserted Rule 21AL, in a case where a capital asset is transferred to a resultant fund being a Category III Alternative Investment Fund (AIF), the original fund shall fulfil the condition that the aggregate investment in the original fund, directly or indirectly, by persons resident in India shall not exceed 5% of the corpus of such fund at the time of such transfer.
Read the full text of CBDT Notification No. 80/2022 dated 08.07.2022 on Other Conditions to be fulfilled by Original Fund for Section 47(viiad)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 8th July, 2022
G.S.R. 524(E).—In exercise of the powers conferred by sub-clause (iv) of clause (a) of Explanation to clause (viiad) of section 47 read with section 295 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. Short title and commencement.—(1) These rules may be called the Income-tax (21st Amendment) Rules, 2022.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, after rule 21AK, the following rule shall be inserted, namely: -
“21AL. Other Conditions required to be fulfilled by the original fund. - For the purposes of sub-clause (iv) of clause (a) of Explanation to clause (viiad) of section 47 of the Act, the original fund, in a case where a capital asset is transferred to a resultant fund being a Category III Alternative Investment Fund, shall fulfil the condition that the aggregate participation or investment in the original fund, directly or indirectly, by persons resident in India shall not exceed five per cent. of the corpus of such fund at the time of such transfer.
Explanation.- For the purpose of this rule, the expressions "original fund" and "resultant fund" shall have the meanings respectively assigned to them in the Explanation to clause (viiac) and clause (viiad) of section 47.”;
[Notification No. 80/2022/F. No. 370142/11/2022-TPL]
NEHA SAHAY, Under Secy.
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