Rule 275 — Approval of the investment fund at its option for purposes of section 9(12). Made under s.9 of the Income-tax Act, 2025.
Rule 275 gives effect to Section 9 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) allows an investment fund, at its option, to seek the Board's approval regarding its eligibility for the purposes of section 9(12). Sub-rule (2) requires the application to be made in writing, enclosing relevant documents and evidence, to the Member, Central Board of Direct Taxes having supervision and control over the work of the Foreign Tax and Tax Research Division. Sub-rule (3) requires it to be made three months before the beginning of the tax year for which approval is sought.
Sub-rule (4) requires the Board to notify a committee headed by a Principal Chief Commissioner or Chief Commissioner of Income-tax and consisting of two other Income-tax authorities not below the rank of Commissioner, to examine the application and recommend on the grant of approval and the conditions, if any. Sub-rule (5) lets the committee call for documents or information from the fund, the Income-tax authorities and other Departments or agencies before recommending.
Sub-rule (6) requires the Board, on the committee's recommendations, within two months from the end of the month in which the application was made, either to grant approval by an order in writing subject to such conditions as it may deem fit, or to reject the application for reasons recorded in writing. Sub-rule (7) makes an approval, once granted and subject to any condition specified, applicable for the tax year referred to in sub-rule (3) and subsequent tax years unless withdrawn. Sub-rule (8) provides that the benefit of section 9(12) shall not be denied to an eligible investment fund granted approval, for any tax year for which the approval is in force and has not been withdrawn.
Sub-rule (9) allows the Board to withdraw approval if satisfied that it was obtained on misrepresentation of facts or fraud, that the conditions in section 9(12) and Schedule I and the guidelines under paragraph 5 of that Schedule are not fulfilled, or that a condition of approval has been violated. Sub-rule (10) requires that no order rejecting an application or withdrawing approval be passed without a reasonable opportunity of being heard, and that such an order be communicated to the fund, the Assessing Officer, and the Principal Commissioner or Commissioner of Income-tax having jurisdiction over the fund.
Section 9(12) protects an eligible investment fund from being treated as having a business connection in India through its fund manager, but eligibility is a factual question the fund would otherwise have to defend year after year in assessment. This rule offers a voluntary approval route that settles it in advance, and sub-rule (8) gives the approval real weight: while it is in force and unwithdrawn, the benefit cannot be denied. The three-month lead time and the two-month decision period exist so the answer arrives before the tax year begins.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| When the application must be made | Three months before the beginning of the tax year for which the fund seeks the approval | Application in writing with relevant documents and evidence | Rule 275(3) |
| Time for the Board to decide | Within two months from the end of the month in which the application has been made | Either grant approval by an order in writing subject to conditions, or reject for reasons recorded in writing | Rule 275(6) |
| Composition of the examining committee | Headed by a Principal Chief Commissioner or Chief Commissioner of Income-tax with two other Income-tax authorities not below the rank of Commissioner | Notified by the Board to examine the application and recommend | Rule 275(4) |
| Period for which an approval operates | The tax year referred to in sub-rule (3) and subsequent tax years | Subject to any condition specified, unless withdrawn by the Board | Rule 275(7) |
Approval is optional but the timing is not. Sub-rule (3) requires the application three months before the tax year begins, so a fund that applies late cannot get the protection for that year through this route — it is left to establish eligibility in the ordinary way. An approval is open-ended: sub-rule (7) carries it into subsequent tax years unless withdrawn, so there is no annual renewal, and sub-rule (8) prevents the benefit of section 9(12) being denied for any year the approval is in force. That protection is only as strong as the conditions attached, because sub-rule (9)(c) allows withdrawal for violating any of them, and sub-rule (9)(b) allows it where the section 9(12) and Schedule I conditions and the paragraph 5 guidelines are not fulfilled — the underlying conditions still have to be met year by year. Withdrawal and rejection both require a hearing under sub-rule (10), and the order goes to the Assessing Officer as well as the fund.
A fund wanting certainty for the tax year beginning 1 April applies in writing to the Member, Central Board of Direct Taxes by 31 December, enclosing its documents. The committee examines it and may call for further information; the Board must grant or reject within two months from the end of the month of the application. If approval is granted subject to conditions, it runs for that year and later years, and the benefit of section 9(12) cannot be denied for any year it remains in force, unless the Board withdraws it after a hearing.
The fund meets it as an application to the Board and the order that follows. Its Assessing Officer meets it as the communicated order under sub-rule (10), which is what stops the eligibility question being reopened in assessment while the approval stands.
The application referred to in sub-rule (2) shall be made three months before the beginning of the tax year for which the fund seeks the approval.
The benefit of section 9(12) shall not be denied to an eligible investment fund, which has been granted approval, for any tax year for which the approval is in force and has not been withdrawn.