Case law › Notifications › 2016 › Notification No. 106/2016 [F. No. 142/15/2015-TPL]/S.O. 3498(E)

Notification 21 November 2016

Notification No. 106/2016 [F. No. 142/15/2015-TPL]/S.O. 3498(E)

Ministry of Finance

What this is

Notification No. 106/2016 [F. No. 142/15/2015-TPL]/S.O. 3498(E) was published on 21 November 2016. Its subject is Ministry of Finance.

This amends the Income-tax Rules. What it changes is the Rules, not the Act — and a rule can never take away what the section gives.

What it does

The Income-tax (32nd Amendment) Rules, 2016, made under section 295 read with section 9A of the Income-tax Act, 1961, amending rule 10V. In sub-rule (1), clause (c), after the words 'has been entered into' the words 'or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf' are inserted, with effect from the date of publication in the Official Gazette. After sub-rule (10), two new sub-rules are inserted, deemed to have been inserted with effect from 15 March 2016. Sub-rule (11) provides that for clause (a) of sub-section (4) of section 9A, a fund manager shall not be considered a connected person of the fund merely because he undertakes the fund management activity of that fund. Sub-rule (12) provides that for clause (d) of sub-section (4) of section 9A, remuneration paid to the fund manager by the fund which is in the nature of a fixed charge and is not dependent on the income or profits derived by the fund from the fund management activity shall not be included in the profits referred to in that clause, if the conditions in clause (m) of sub-section (3) of section 9A are satisfied and the fixed charge was agreed by the fund manager in writing at the beginning of the relevant fund management activity.

Who it reaches

offshore funds seeking the safe harbour in section 9A
India-based fund managers of such funds
funds established or registered in a notified country or specified territory
assessing officers testing the eligible fund and eligible manager conditions

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.9A	s.9
s.295	s.533

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 21st November, 2016
INCOME-TAX
S.O. 3498(E).—In exercise of the powers conferred by section 295 read with section 9A 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. These rules may be called the Income-tax ( 32nd Amendment) Rules, 2016.

2. In the Income-tax Rules, 1962, in rule 10V,-
(i) in sub-rule (1), in clause (c), after the words "has been entered into", the words "or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf" shall be inserted with effect from the date of their publication in the Official Gazette;

(ii) after sub-rule (10), the following sub-rules shall be inserted, and shall be deemed to have been inserted with effect from the 15th day of March, 2016, namely:-

"(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 .".

[Notification No. 106 /2016/ F. No. 142/15/2015-TPL]

NIRAJ KUMAR, Under Secy. (Tax Policy & Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969(E), dated 26th March, 1962 and was last amended by notification number G.S.R.1073(E), dated 16th November, 2016.

Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

Digitally signed by
ALOK KUMAR
Date: 2016.11.22
14:13:13 +05'30'

What it changes

The rule numbers are the 1962 Rules’ own, as the notification names them. The right-hand column is the department’s own mapping into the Income-tax Rules, 2026, which renumbered nearly everything.

Rule of the 1962 Rules	Now, in the 2026 Rules
Rule 10V	rule 274

From when

the date of its publication in the Official Gazette for the change to sub-rule (1)(c); 15 March 2016, retrospectively, for the new sub-rules (11) and (12).

What to watch

The two operative dates differ: the insertion in sub-rule (1)(c) takes effect from the date of publication in the Official Gazette, while sub-rules (11) and (12) are deemed inserted with effect from 15 March 2016 and are therefore retrospective.
Sub-rule (11) removes the fund management activity itself as a ground for treating the manager as a connected person under section 9A(4)(a).
The exclusion in sub-rule (12) applies only to a fixed charge unconnected with the fund's income or profits, only if the conditions in section 9A(3)(m) are met, and only if the fixed charge was agreed in writing at the outset.
The widened clause (c) brings in funds established, incorporated or registered in a country or specified territory notified by the Central Government, besides the earlier limb.
The principal rules were last amended by G.S.R. 1073(E) dated 16 November 2016.

Where you meet it

In an offshore fund's claim that its fund manager in India does not create a business connection or residence under section 9A, and in the assessment of the manager's remuneration.

What it names

Rules it names. Rule 10V of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 59/2022 [F. No. 370142/11/2022-TPL] / S.O. 2602(E) — Ministry of Finance 6 June 2022
Circular No. 12/2021 — Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic 25 June 2021
Notification No. 13/2021 [F. No. 142/15/2015-TPL]/ GSR No. 162(E) — Ministry of Finance 9 March 2021
Circular No. 1/2021 — Amount of remuneration prescribed under section 9A 3 m of the income tax act 1961 15 January 2021
Notification No. 41/2020 [F. No. 142/15/2015-TPL- Part (1)] / SO 2148(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 30 June 2020
Circular No. 8/2019 — Clarification regarding definition of fund manager under section 9A 4 b of the income tax act 1961 10 May 2019

← Notification No. 107/2016/ F.No. 370142/28/2016-TPL / S.O. 3573(E) · Notification No.105/2016 [F.No.142/8/2014-TPL]/ GSR 1073(E) →

What a notification is. A notification is made under a power the Act itself gives, and within that power it is law — unlike a circular, which only binds the department. Its reach is the reach of the enabling provision and no wider, and the date it carries decides from when it works.

Source: the Income Tax Department’s own published text — its page for this instrument.