Guidelines for application of section 9A

Where the investment in the fund has been made directly by an institutional entity, the number of members and the participation interest in the fund shall be determined by looking through the said entity, if it,- (a) independently satisfies the conditions mentioned in clauses (c), (e), (f) and (g) of sub-section (3) of section 9A; (b) has been setup solely for the purpose of pooling funds and investment thereof; and (c) is resident of a country or specified territory with which an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf. (2) For the purposes of clause (c) of sub-section (3) of section 9A, where direct investor in the fund is a person other than a natural person, the fund shall undertake appropriate due diligence to ascertain the indirect participation, if any, of a person resident in India and the extent thereof: Provided that where such direct investor is, the Government or the Central bank or a sovereign fund or a multilateral agency or appropriately regulated investor in the form of pension fund or University fund or a bank or collective investment vehicles such as mutual funds, the fund shall obtain a declaration in writing from the direct investor regarding the participation, if any, of a person resident in India and the indirect participation in the fund of any person resident in India may be determined by the fund on the basis of such declaration. Explanation. - For the purposes of this sub-rule an investor shall be considered to be appropriately regulated if it is regulated or supervised by the securities market regulator or the banking regulator of the country outside India of which it is resident, in the same capacity in which it has made investment in the fund. (3) A fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A, if,- (a) non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of sub-section (3) of section 9A,- (i) is for the reasons beyond the control of the fund and it does not exceed a period of ninety days; (ii) does not exceed a period of eighteen months beginning from the date on which the fund is setup or is not beyond the final closing of the fund, whichever is earlier, and bona fide efforts are made to satisfy the conditions specified in the clauses (c), (d) and (e) of sub-section (3) of section 9A; (iii) is for the reason that the fund is in the process of being wound up and it does not exceed a period of one year beginning from the date on which the process of winding has begun; or (b) there is delay in furnishing the statement referred to in sub-section (5) of section 9A and such delay does not exceed a period of ninety days. (4) For the purposes of clause (k) of sub-section (3) of section 9A, a fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds such rights in, or in relation to, the entity, which results in the fund holding the share capital or a voting power or an interest exceeding twenty six per cent of the total share capital of, or as the case may be, total voting power or total interest in, the entity. (5) Subject to the provisions of sub- rules (6), (7) and (8), for the purposes of determining the arm's length price in respect of any remuneration, paid by the eligible investment fund to an eligible fund manager, referred to in clause (m) of sub-section (3) of section 9A, the provisions of the Act shall apply as if,- (i) the transaction between the eligible investment fund and the eligible fund manager is an international transaction; and (ii) the eligible investment fund and the eligible fund manager are associated enterprises. (6) The fund manager shall keep and maintain information and documents as required under section 92D and the rules made thereunder. (7) 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. (8) Where the fund manager has either not maintained the document or information as required under section 92D and the rules made thereunder or not produced the document or information before the Assessing Officer or the Transfer Pricing Officer, as the case may be, then, the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall, before determining the arm's length price for the purposes of clause (m) of sub-section (3) of section 9A, provide an opportunity to the fund to produce the information and documents necessary for the determination of the arm's length price and the arm's length price shall be determined after considering the documents or information, if any, provided by the fund. (9) If in any previous year, it is determined that the remuneration paid or payable by a fund to the fund manager is not in accordance with the provisions of clause (m) of sub-section (3) of section 9A, then the benefits of section 9A shall not be denied to the fund which otherwise satisfies all other conditions specified in section 9A. (10) Nothing contained in sub-rule (9) shall apply to a fund if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm's length price,- (a) for a period of three previous years in succession; or (b) for any three out of the preceding four previous years. (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.