Section 9A(3)

Section 9A(3) — the law in short

What the courts have decided on section 9A(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — section 9A: an offshore fund managed from India has no business connection here, but only if every condition in section 9A(3) is met CBDT Circulars & InstructionsCuts both ways
  My client is an offshore fund that has moved its portfolio manager to Mumbai. The Assessing Officer says the manager is a business connection and the whole fund is now taxable in India. Is there a safe harbour?
  Yes, but it is a conditional one. Section 9A(1) provides that, notwithstanding section 9(1), the fund management activity carried out through an eligible fund manager acting on behalf of an eligible investment fund shall not constitute a business connection in India of that fund, and section 9A(2) provides that, notwithstanding section 6, the fund shall not be said to be resident in India merely because the manager undertaking fund management activities on its behalf is situated in India. The protection is available only where the fund answers the definition in section 9A(3), which carries thirteen lettered conditions, (a) to (m), every one of which has to be satisfied.
• Statutory position — section 9A(4) and rule 10V: who counts as an eligible fund manager, and the minimum fee the fund must pay him CBDT Circulars & InstructionsCuts both ways
  I am setting up an India-based manager for an offshore fund. What does the manager himself have to satisfy, and is there a floor on the fee the fund must pay him?
  Section 9A(4) defines the eligible fund manager as a person engaged in the activity of fund management who satisfies four conditions: he is not an employee of the fund or a connected person of the fund; he is registered as a fund manager or an investment advisor in accordance with the specified regulations; he is acting in the ordinary course of his business as a fund manager; and he, along with his connected persons, is not entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the fund from the transactions carried out by the fund through him. Separately, condition (m) of section 9A(3) requires the fund's remuneration to him to be not less than a prescribed amount, and rule 10V(12) prescribes that amount.
• Statutory position — rule 10V: the look-through for institutional investors, the cure periods that save a breach, and the twenty-six per cent control test CBDT Circulars & InstructionsCuts both ways
  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.
• Statutory position — section 9A(8A): the conditions can be switched off for a fund manager located in an IFSC, if he commenced operations by 31 March 2030 CBDT Circulars & InstructionsCuts both ways
  Our fund manager is being set up in GIFT City rather than in Mumbai. Does that make any difference to the section 9A conditions?
  It can, but only through a notification. Section 9A(8A) empowers the Central Government, by notification in the Official Gazette, to specify that any one or more of the conditions in clauses (a) to (m) of section 9A(3) or clauses (a) to (d) of section 9A(4) shall not apply, or shall apply with such modifications as the notification specifies, in the case of an eligible investment fund and its eligible fund manager where the manager is located in an International Financial Services Centre and has commenced its operations on or before 31 March 2030. The relaxation is not automatic: without a notification covering the condition in question, every condition continues to apply in full.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.