Rule 10V

Rule 10V — the law in short

What the courts have decided on section Rule 10V, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• 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(5) and rule 10VB: the fund's annual statement in Form 3CEK, due ninety days after the financial year CBDT Circulars & InstructionsCuts both ways
  The offshore fund I advise has no Indian income and files no return here. Does it still have to file anything because it uses an Indian fund manager?
  Yes. Section 9A(5) requires every eligible investment fund, in respect of its activities in a financial year, to furnish within ninety days from the end of that financial year a statement in the prescribed form to the prescribed income-tax authority, containing information relating to the fulfilment of the conditions specified in section 9A and such other relevant information or documents as may be prescribed. Rule 10VB prescribes Form No. 3CEK, to be furnished electronically under digital signature to the Assessing Officer who has jurisdiction over the fund, or who would have had jurisdiction had the fund been assessable to tax in India but for section 9A.
• Statutory position — rule 10VA: the optional CBDT approval that locks in a fund's section 9A eligibility CBDT Circulars & InstructionsCuts both ways
  Is there any way to get certainty on a fund's section 9A eligibility in advance, instead of arguing it years later on assessment?
  Yes, and it is optional. Rule 10VA(1) provides that an investment fund may at its option seek the approval of the Board regarding its eligibility for the purposes of section 9A. The application is made in writing, with relevant documents and evidence, to the Member of the CBDT having supervision and control over the Foreign Tax and Tax Research Division, three months before the beginning of the previous year for which approval is sought, and the Board must dispose of it within sixty days from the end of the month in which it was made.

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.