My offshore fund breached one of the section 9A(3) conditions for part of the year, and one of its investors is itself a pooling vehicle. Is the safe harbour lost for the whole year?
Not necessarily. Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund where non-fulfilment of conditions (c), (d) or (e) of section 9A(3) is for reasons beyond the fund's control and does not exceed ninety days, or does not exceed eighteen months from the date the fund is set up or the final closing of the fund, whichever is earlier, where bona fide efforts are made, or arises because the fund is being wound up and does not exceed one year from the date the winding-up process began; and it gives the same protection where the delay in furnishing the section 9A(5) statement does not exceed ninety days. Rule 10V(1) separately requires a look-through where the investment has been made directly by an institutional entity, and rule 10V(4) fixes the point at which the fund is said to control or manage a business in India for condition (k) at a holding exceeding twenty-six per cent.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Income-tax Rules 1962, rule 10V, sub-rules (1), (2), (3) and (4), as printed on the Income-tax Department's rule page; the page carries no year stamp, the rule could not be dated, and the date in 'decided_on' is a PLACEHOLDER only — it is not a commencement date for this rule and nothing should be inferred from it.. It bears on section Rule 10V, section 9A, section 9A(3), section 9A(5), section 90, section 90A of the Income Tax Act 1961, in Residence & Treaty Benefit and How Tax Law Is Read matters.
Practitioners reading section 9A alone conclude that a temporary breach is fatal, because the section itself contains no tolerance. All of the tolerance sits in the rule, and it is confined: it covers only conditions (c) — the five per cent resident participation ceiling — (d) — the investor protection regulation condition — and (e) — the twenty-five member floor. It does not extend to the corpus floor in condition (j), to the concentration conditions in (f), (g), (h) and (i), or to the remuneration condition in (m). The look-through in rule 10V(1) cuts both ways: where a pooling entity invests directly, the number of members and the participation interest are determined by looking through it, but only if that entity independently satisfies conditions (c), (e), (f) and (g) of section 9A(3), was set up solely for pooling funds and investment, and is resident of a treaty or notified country. Rule 10V(2) then imposes a due diligence obligation on the fund itself where the direct investor is not a natural person, with a proviso that lets the fund rely on a written declaration where the direct investor is a Government, a Central bank, a sovereign fund, a multilateral agency, or an appropriately regulated pension fund, University fund, bank or collective investment vehicle such as a mutual fund. The twenty-six per cent figure in rule 10V(4) is the single most useful number in the machinery: it converts the open-ended words 'control and manage' in condition (k) into an arithmetic test.
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Not a case. Rule 10V(1) provides that 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 that entity, if it (a) independently satisfies the conditions in clauses (c), (e), (f) and (g) of section 9A(3), (b) has been set up solely for the purpose of pooling funds and investment thereof, and (c) is resident of a country or specified territory with which an agreement under section 90(1) or section 90A(1) has been entered into, or is established or incorporated or registered in a notified country or specified territory. Rule 10V(2) provides that, for clause (c) of section 9A(3), where the 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; its proviso permits the fund, where the direct investor is the Government or the Central bank or a sovereign fund or a multilateral agency or an appropriately regulated investor in the form of a pension fund or University fund or a bank or a collective investment vehicle such as a mutual fund, to obtain a written declaration from the direct investor and to determine indirect participation on the basis of that declaration; the Explanation treats an investor as 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 the investment. Rule 10V(4) provides that, for clause (k) of section 9A(3), a fund shall be said to be controlling or managing a business carried out by any entity if it directly or indirectly holds such rights in, or in relation to, the entity which result in the fund holding share capital, voting power or interest exceeding twenty-six per cent of the total share capital, total voting power or total interest in the entity.
Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A if, first, non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of section 9A(3) is (i) for reasons beyond the control of the fund and does not exceed a period of ninety days, or (ii) does not exceed a period of eighteen months beginning from the date on which the fund is set up or is not beyond the final closing of the fund, whichever is earlier, and bona fide efforts are made to satisfy those conditions, or (iii) is for the reason that the fund is in the process of being wound up and does not exceed a period of one year beginning from the date on which the process of winding has begun; or, second, there is delay in furnishing the statement referred to in section 9A(5) and such delay does not exceed a period of ninety days. Rule 10V(1) supplies the look-through described above, rule 10V(2) the due diligence obligation and the declaration route, and rule 10V(4) the twenty-six per cent control test for condition (k).
Not a judicial route. The conditions in section 9A(3) are continuing conditions attached to a year, and a fund that breaches one of them for a week would, on the section alone, lose the safe harbour for the whole year. The rule supplies proportionality where the breach is of the three conditions least within the fund's control — the identity and behaviour of investors under (c), the regulatory status of the fund abroad under (d), and the member count under (e) — and it does so on three separate footings that match three life stages of a fund: an operational accident (ninety days), the ramp-up before final closing (eighteen months), and the wind-down (one year). The look-through in sub-rule (1) exists because conditions (e), (f) and (g) count members and interests, and a single feeder vehicle would otherwise appear as one member holding a large interest; the conditions attached to the look-through ensure it is used on genuine pooling vehicles rather than on a wrapper interposed to fix the count. Sub-rule (4) reduces the open-textured phrase 'control and manage' in condition (k) to a bright-line shareholding test so that the condition can be certified rather than argued.
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.
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Handle my notice → Ask a CA on WhatsAppNot necessarily. Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund where non-fulfilment of conditions (c), (d) or (e) of section 9A(3) is for reasons beyond the fund's control and does not exceed ninety days, or does not exceed eighteen months from the date the fund is set up or the final closing of the fund, whichever is earlier, where bona fide efforts are made, or arises because the fund is being wound up and does not exceed one year from the date the winding-up process began; and it gives the same protection where the delay in furnishing the section 9A(5) statement does not exceed ninety days. Rule 10V(1) separately requires a look-through where the investment has been made directly by an institutional entity, and rule 10V(4) fixes the point at which the fund is said to control or manage a business in India for condition (k) at a holding exceeding twenty-six per cent. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section Rule 10V, section 9A, section 9A(3), section 9A(5), section 90, section 90A of the Income Tax Act 1961. It is reported as Income-tax Rules 1962, rule 10V, sub-rules (1), (2), (3) and (4), as printed on the Income-tax Department's rule page; the page carries no year stamp, the rule could not be dated, and the date in 'decided_on' is a PLACEHOLDER only — it is not a commencement date for this rule and nothing should be inferred from it.. Practitioners reading section 9A alone conclude that a temporary breach is fatal, because the section itself contains no tolerance. All of the tolerance sits in the rule, and it is confined: it covers only conditions (c) — the five per cent resident participation ceiling — (d) — the investor protection regulation condition — and (e) — the twenty-five member floor. It does not extend to the corpus floor in condition (j), to the concentration conditions in (f), (g), (h) and (i), or to the remuneration condition in (m). The look-through in rule 10V(1) cuts both ways: where a pooling entity invests directly, the number of members and the participation interest are determined by looking through it, but only if that entity independently satisfies conditions (c), (e), (f) and (g) of section 9A(3), was set up solely for pooling funds and investment, and is resident of a treaty or notified country. Rule 10V(2) then imposes a due diligence obligation on the fund itself where the direct investor is not a natural person, with a proviso that lets the fund rely on a written declaration where the direct investor is a Government, a Central bank, a sovereign fund, a multilateral agency, or an appropriately regulated pension fund, University fund, bank or collective investment vehicle such as a mutual fund. The twenty-six per cent figure in rule 10V(4) is the single most useful number in the machinery: it converts the open-ended words 'control and manage' in condition (k) into an arithmetic test. If it applies to you, the first step is this: Identify which condition was breached before reaching for rule 10V(3) — the cure periods reach only conditions (c), (d) and (e) of section 9A(3), and nothing else.
Not a case. Rule 10V(1) provides that 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 that entity, if it (a) independently satisfies the conditions in clauses (c), (e), (f) and (g) of section 9A(3), (b) has been set up solely for the purpose of pooling funds and investment thereof, and (c) is resident of a country or specified territory with which an agreement under section 90(1) or section 90A(1) has been entered into, or is established or incorporated or registered in a notified country or specified territory. Rule 10V(2) provides that, for clause (c) of section 9A(3), where the 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; its proviso permits the fund, where the direct investor is the Government or the Central bank or a sovereign fund or a multilateral agency or an appropriately regulated investor in the form of a pension fund or University fund or a bank or a collective investment vehicle such as a mutual fund, to obtain a written declaration from the direct investor and to determine indirect participation on the basis of that declaration; the Explanation treats an investor as 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 the investment. Rule 10V(4) provides that, for clause (k) of section 9A(3), a fund shall be said to be controlling or managing a business carried out by any entity if it directly or indirectly holds such rights in, or in relation to, the entity which result in the fund holding share capital, voting power or interest exceeding twenty-six per cent of the total share capital, total voting power or total interest in the entity. The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A if, first, non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of section 9A(3) is (i) for reasons beyond the control of the fund and does not exceed a period of ninety days, or (ii) does not exceed a period of eighteen months beginning from the date on which the fund is set up or is not beyond the final closing of the fund, whichever is earlier, and bona fide efforts are made to satisfy those conditions, or (iii) is for the reason that the fund is in the process of being wound up and does not exceed a period of one year beginning from the date on which the process of winding has begun; or, second, there is delay in furnishing the statement referred to in section 9A(5) and such delay does not exceed a period of ninety days. Rule 10V(1) supplies the look-through described above, rule 10V(2) the due diligence obligation and the declaration route, and rule 10V(4) the twenty-six per cent control test for condition (k).
Not a judicial route. The conditions in section 9A(3) are continuing conditions attached to a year, and a fund that breaches one of them for a week would, on the section alone, lose the safe harbour for the whole year. The rule supplies proportionality where the breach is of the three conditions least within the fund's control — the identity and behaviour of investors under (c), the regulatory status of the fund abroad under (d), and the member count under (e) — and it does so on three separate footings that match three life stages of a fund: an operational accident (ninety days), the ramp-up before final closing (eighteen months), and the wind-down (one year). The look-through in sub-rule (1) exists because conditions (e), (f) and (g) count members and interests, and a single feeder vehicle would otherwise appear as one member holding a large interest; the conditions attached to the look-through ensure it is used on genuine pooling vehicles rather than on a wrapper interposed to fix the count. Sub-rule (4) reduces the open-textured phrase 'control and manage' in condition (k) to a bright-line shareholding test so that the condition can be certified rather than argued. In the words reproduced by the source cited on this page: "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."
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Income-tax Rules 1962, rule 10V, sub-rules (1), (2), (3) and (4), as printed on the Income-tax Department's rule page; the page carries no year stamp, the rule could not be dated, and the date in 'decided_on' is a PLACEHOLDER only — it is not a commencement date for this rule and nothing should be inferred from it.. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section Rule 10V, section 9A, section 9A(3), section 9A(5), section 90, section 90A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A if, first, non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of section 9A(3) is (i) for reasons beyond the control of the fund and does not exceed a period of ninety days, or (ii) does not exceed a period of eighteen months beginning from the date on which the fund is set up or is not beyond the final closing of the fund, whichever is earlier, and bona fide efforts are made to satisfy those conditions, or (iii) is for the reason that the fund is in the process of being wound up and does not exceed a period of one year beginning from the date on which the process of winding has begun; or, second, there is delay in furnishing the statement referred to in section 9A(5) and such delay does not exceed a period of ninety days. Rule 10V(1) supplies the look-through described above, rule 10V(2) the due diligence obligation and the declaration route, and rule 10V(4) the twenty-six per cent control test for condition (k). It arises in Residence & Treaty Benefit and How Tax Law Is Read matters, on section Rule 10V, section 9A, section 9A(3), section 9A(5), section 90, section 90A of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a breach of condition (c), (d) or (e), record contemporaneously why it was beyond the fund's control and when it was cured, and keep the period inside ninety days; the rule requires both. For a newly set up fund, use the eighteen-month window in rule 10V(3)(a)(ii) — it runs from the date the fund is set up or to the final closing of the fund, whichever is EARLIER, and it is conditional on bona fide efforts to satisfy the conditions. For a fund in winding up, the window is one year from the date on which the process of winding began — rule 10V(3)(a)(iii). Where the annual statement was late, check the length of the delay: rule 10V(3)(b) preserves the benefit where the delay in furnishing the section 9A(5) statement does not exceed ninety days. Where an institutional entity has invested directly, test that entity against conditions (c), (e), (f) and (g) of section 9A(3) in its own right before relying on the look-through in rule 10V(1); the look-through is not available unless it independently satisfies them, was set up solely for pooling and investment, and is resident of a treaty or notified country. Where the direct investor is not a natural person, do and document the due diligence rule 10V(2) requires, and take the written declaration route only for the categories the proviso to that sub-rule lists. For condition (k), measure the fund's rights in the Indian entity against the twenty-six per cent threshold in rule 10V(4) — share capital, voting power or interest, held directly or indirectly.
Still good law. The date in 'decided_on' is a placeholder, not a commencement: it is borrowed from the version of section 9A read alongside this rule and carries no legislative meaning for rule 10V. Note that the same date appears as a genuine commencement date in other entries of this batch, so it must be read with this note. Validity could not be fully checked. The rule text is as printed on the Income-tax Department's own rule page, which carries no year stamp, so I cannot say from that page whether the rule has been amended more recently, and I did not locate a notification amending it. The conditions the rule refers to — clauses (c), (d), (e) and (k) of section 9A(3) — were read this pass on the Department's section page carrying the year stamp 2025 and correspond to the conditions the rule names. No judicial decision construing rule 10V was located: an indiankanoon search on 8 September 2026 for 'section 9A' with 'eligible fund manager' returned the rule's own bare text and SEBI regulations pages and no judgment or Tribunal order. Sub-rules (1), (2), (3) and (4) were re-read word-for-word on the indiankanoon bare-rule text of rule 10V (doc 60297115) and came back identical — a route independent of the Department. That text is an earlier consolidation running only to sub-rule (12), which shows that the present sub-rules (13), (14) and (15) are later and that sub-rules (5) to (10), which the present sub-rule (11) disapplies on and after 1 April 2019, were once the operative reporting machinery. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a statutory entry, not a decision, and 'decided_on' is not a decision date. Rule 10V could NOT be dated at all: the Income-tax Department's rule pages carry no 'Year:' stamp, unlike its section pages, so there is no way on that page to tell how current the rule text is or when it was last amended. The date 1 April 2025 in 'decided_on' is therefore a placeholder equal to the commencement date of the version of section 9A read alongside it, and it carries no legislative meaning for the rule itself. A later pass should try to date rule 10V against a notification or an amending rule. One point of internal tension in the rule is noted in the companion entry on section 9A(4): sub-rule (7) names Form No. 3CEJ and sub-rule (13) names Form No. 3CEJA, and sub-rule (11) disapplies sub-rules (5) to (10) on or after 1 April 2019. The tier value 'cbdt' is used because the library's fixed tier vocabulary has no value for a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A if, first, non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of section 9A(3) is (i) for reasons beyond the control of the fund and does not exceed a period of ninety days, or (ii) does not exceed a period of eighteen months beginning from the date on which the fund is set up or is not beyond the final closing of the fund, whichever is earlier, and bona fide efforts are made to satisfy those conditions, or (iii) is for the reason that the fund is in the process of being wound up and does not exceed a period of one year beginning from the date on which the process of winding has begun; or, second, there is delay in furnishing the statement referred to in section 9A(5) and such delay does not exceed a period of ninety days. Rule 10V(1) supplies the look-through described above, rule 10V(2) the due diligence obligation and the declaration route, and rule 10V(4) the twenty-six per cent control test for condition (k).
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