CBDT expands non-applicability of Sec. 56(2)(x) to include fund relocation to IFSC
The CBDT vide Notification No. 51/2023 dated July 18, 2023 amend the Income-tax Rules, 1962 (“the IT Rules”). These rules are referred to as the Income-tax (Thirteenth Amendment) Rules, 2023. The rules come into effect from the date of their publication in the Official Gazette.
The following changes are made:
2. In the Income-tax Rules, 1962, in rule 11UAC,
(i) in sub-rule (4), in the Explanation, for the words “this clause” the words “this sub- rule” shall be substituted;
(ii) after sub-rule (4), the following sub-rule shall be inserted, namely:—
„(5) any movable property, being shares or units or interest in the resultant fund received by the fund management entity of the resultant fund, in lieu of shares or units or interest held by the investment manager entity in the original fund, pursuant to the relocation, subject to the following conditions, namely:-
(i) not less than ninety per cent of shares or units or interest in the fund management entity of the resultant fund are held by the same entity(ies) or person(s) in the same proportion as held by them in the investment manager entity of the original fund; and
(ii) not less than ninety per cent of the aggregate of shares or units or interest in the investment manager entity of the original fund was held by such entity(ies) or person(s).
Explanation. — For the purposes of this sub-rule, —
(a) the expressions “relocation”, “original fund” and “resultant fund” shall have the meanings respectively assigned to them in the Explanation to clause (viiac) and clause (viiad) of section 47;
(b) “fund management entity” shall have the same meaning as provided in the sub-clause (p) of regulation 2 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022; and
(c) “investment manager entity” means the fund manager of the original fund regulated by the respective regulation of the jurisdiction in which the original fund is located.‟