Rule 331 — Procedure for approval under Paragraph (1)(z)(i) and (ii) of Schedule XV to the Act. Made under s.515 of the Income-tax Act, 2025.
Rule 331 gives effect to Section 515 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) requires the Central Board of Direct Taxes, before granting approval to a public company under paragraph 1(z)(i) of Schedule XV or to a Mutual Fund under paragraph 1(z)(ii), to satisfy itself on four things set out in a Table: the entity, the application Form, the documents attached, and the time limit for filing. For a public company the application is in Form No. 189, accompanied by a copy of the certificate of incorporation under the Companies Act, 2013 and audited balance sheet and profit and loss account for the three tax years immediately preceding the tax year of application or for the period of its existence, whichever is lesser, and it is to be filed three months before the eligible issue of capital as referred to in paragraph 6(i) of Schedule XV. For a Mutual Fund the application is in Form No. 190, accompanied by a copy of the certificate of registration issued by the Securities and Exchange Board of India and the same audited accounts, and is to be filed three months before the public issue.
Sub-rule (2) requires the Board to pass an order approving or denying the application, and provides that a decision denying approval shall not be made without providing the applicant a reasonable opportunity of being heard.
Sub-rule (3) governs deployment of the money raised. Every applicant shall invest all its total paid-up capital, raised through equity issue or debentures, in the manner stated: at least 25% of the capital raised is to be invested in the infrastructure facility in the case of a public company, or in the eligible issue of capital of any company referred to in paragraph 6(i) of Schedule XV in the case of a Mutual Fund; that investment is to be made before the end of one year from the date of approval of the Board; and the rest of the capital is to be invested in like manner within three years from the date of approval.
Sub-rule (4) requires every applicant to submit a certificate from an accountant, as defined in section 515(3)(b), specifying the amount invested in each tax year from the date of approval of the Board.
Schedule XV gives an advantage to investors in an approved public company or Mutual Fund, so the approval has to be given before the money is raised and has to be followed by proof that the money went where it was supposed to. The rule fixes the application forms and papers, requires filing three months ahead of the issue so the Board can decide before the public is invited, and then sets a deployment timetable with an accountant's certificate as the annual check.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time for filing the application by a public company | Three months before the eligible issue of capital | Eligible issue of capital as referred to in paragraph 6(i) of Schedule XV to the Act | Rule 331(1), Table Sl. No. 1, column E |
| Time for filing the application by a Mutual Fund | Three months before the public issue | Application in Form No. 190 with the documents in column D | Rule 331(1), Table Sl. No. 2, column E |
| Period of accounts to be attached to the application | Three tax years immediately preceding the tax year of application, or the period of existence, whichever is lesser | Audited balance sheet and profit and loss account, for both a public company and a Mutual Fund | Rule 331(1), Table column D |
| Minimum first tranche of capital to be invested | At least 25% of the capital raised | In the infrastructure facility for a public company, or in the eligible issue of capital of a company referred to in paragraph 6(i) of Schedule XV for a Mutual Fund | Rule 331(3)(a) |
| Time for investing that first tranche | Before the end of one year from the date of approval of the Board | Applies to the at least 25% referred to in clause (a) | Rule 331(3)(b) |
| Time for investing the rest of the capital | Within three years from the date of approval | The rest of the capital, invested in like manner | Rule 331(3)(c) |
The application is not something that can be made once the issue is on foot: both Table entries require it three months before the issue, and the Board's satisfaction under sub-rule (1) runs to the Form, the documents and that timing together. The 25% in sub-rule (3)(a) is a floor and the one year in clause (b) is the outer date for it; the balance is not left free, clause (c) requires it to be invested in like manner within three years from approval. Note that the obligation in sub-rule (3) is to invest all the total paid-up capital raised through equity issue or debentures, so the two deadlines divide that whole amount rather than a part of it. Denial of approval carries a hearing right under sub-rule (2), but the rule gives no such right where approval is granted on terms.
A public company plans an eligible issue of capital in October. It must file Form No. 189 three months before that issue, with its certificate of incorporation and audited accounts for the three tax years immediately preceding, or for its shorter period of existence. If the Board approves in August and the company raises Rs 100 crore, at least Rs 25 crore must go into the infrastructure facility before the end of one year from the date of approval, and the remaining Rs 75 crore in like manner within three years from that date, with an accountant's certificate specifying the amount invested in each tax year.
You meet it as the application in Form No. 189 or Form No. 190 filed with the Board ahead of an issue, the Board's order approving or denying it, and the annual accountant's certificate of amounts invested that follows approval.
at least 25% of the capital raised shall be invested
such investment shall be made before the end of one year from the date of approval of the Board
the rest of the capital shall be invested in like manner within three years from the date of approval