MM TAX CLUB

Circular No. 12 /2023 dated July 12, 2023

Clarification regarding taxability of income earned by a non-resident investor from off-shore investments in investment fund routed through an Alternative Investment Fund

The CBDT Circular No. 14/2019 dated July 03, 2019 was issued to clarify the taxability of income earned by a non-resident investor from outside India (off-shore investment) routed through investment fund as defined in Explanation 1(a) to Chapter XII-FB of the Income-tax Act, 1961 (the Act). This Circular was made applicable to Category I or Category II Alternative Investment Funds (AIFs), regulated under Securities and Exchange Board of India (SEBI) regulations.

By Finance Act. 2023. the definition of 'investment fund' under the Income-tax Act, 1961 was amended to include reference to International Financial Services Centres Authority (Fund Management) Regulations, 2022 under International Financial Services Centres Authority (IFSCA) Act, 2019.

In view of the aforesaid amendment in the definition of ‘investment fund', para 3 of the Circular No. 14/2019 dated July 03, 2019 is to be read as under:

“3. Chapter XII-FB contains special provisions relating to tax on income of investment funds and income received from such funds. Under Chapter XII-FB, section 115UB of the Act ('Tax on income of investment fund and its unit holders') is the applicable provision to determine the income and tax-liability of investment funds & their investors. In this context, "investment fund" is defined in Explanation 1 of Chapter XII-FB to mean any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992). or regulated under the International  Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International  Financial Services Centres Authority Act, 2019 (50 of 2019). Thus, provisions of section 115UB apply only to Category I or Category II AIFs regulated by Securities and Exchange Board of India (SEBI) or International Financial Services Centres Authority (IFSCA).”

All the other contents of the Circular dated July 03, 2019 remain same. It may be circulated widely for information of all stakeholders and Departmental officers.

Notification No. 48/2023 dated July 11, 2023

                                    In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Yamuna Expressway Industrial Development Authority’, (PAN AAALT0341D), an authority constituted by the State Government of Uttar Pradesh, in respect of the following specified income arising to that Authority, namely:-

(a) Grants received from the State Government;

(b) Moneys received from the disposal of land, building and other properties, movable and immovable;

(c) Moneys received by the way of rent & fees or any other charges from the disposal of land, building and other properties, movable and immovable;

(d) The amount of interest earned on the funds deposited in the banks; and (e) The amount of interest/penalties received on the deferred payment received from the Allottees of various movable or immovable properties.

2. This notification shall be effective subject to the conditions that Yamuna Expressway Industrial Development Authority,-

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial year 2018-2019 to financial year 2022-2023