The Central Board of Direct Taxes (CBDT) had issued a draft notification looking for inputs for framing of rules relating to Fund Manager Regime under Section 9A of the Income Tax Act, 1961.
An official spokesperson from the CBDT had stated that Section 9A of the Income-tax Act, 1961 (the Act) explains relating to a special taxation regime with regard to some offshore funds in the context of their fund managers who are being located in India.
An official spokesperson from the CBDT also stated that for an eligible investment fund, the fund management action that is carried out through an eligible fund manager functioning for such funds would not establish a business connection in India of the held fund.
In an official release it was stated that further, it is provided that an eligible investment fund would not be said to be resident in India only because the eligible fund manager undertaking fund management actions on its behalf is located in India subjected to the conditions stated in sub-section (3) of section 9A, one of which [clause (m) of stated sub-section] furnishes that the remuneration paid through the fund towards an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not below the arm's length price of the said activity.
As per Income-tax Rules, 1962 (the Rules) has been amended by way of insertion of rules 10V to 10VB and Forms 3CEJ and 3CEK by means of notification No 14/2016 with SO 1101 (E) which was made on 15th March 2016. Rule 10V was furthermore amended by means of notification No 106/2016 with SO 3498(E) which was made on 21st November 2016.
According to the Sub-rule (5) to (10) of rule 10V of the Rules, it comprises the clauses regarding the determination of the arm's length price relating to any payment paid through the eligible investment fund towards an eligible fund manager as stated in clause (m) of sub-section (5) of Section 9A of the I.T Act.
The Finance (No 2) Act, 2019 with effect from 1st April, 2019, inter alia, amended clause (m) of sub-section (5) of section 9A in order to provide that the remuneration paid through the fund towards an eligible fund manager relating to funding management activity undertaken by him on its behalf is not below the amount calculated in such manner as may be set.
Also, the manner for calculation of the sum, compared to which the payment paid towards the eligible fund manager should not be less and it is required to be prescribed.
The draft notification suggesting the abovementioned amendments was uploaded on www.incometaxindia.gov.in for inputs from stakeholders as well as the general public. The inputs on the draft rules might be sent electronically at the email address, ustpl1@nic.in, latest by 19th December 2019.
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