The decision of the central government to grant 100% tax exemptions for sovereign wealth funds for their investments in the infrastructure sector with the objective to give a boost to the infra investments in India.
The Central Government specified the sovereign wealth fund, namely, the MIC Redwood 1 RSC Limited, Abu Dhabi, United Arab Emirates, (the assessee) as the specified person for the purposes of the clause 23FE of section 10 of the Income-tax Act, 1961 in respect of the investment made by it in India on or after the date of publication of this notification in the Official Gazette but on or before the 31st day of March, 2024 subject to the fulfilment of the various conditions.
Firstly, the assessee shall file return of income, for all the relevant previous years falling within the period beginning from the date in which the said investment has been made and ending on the date on which such investment is liquidated, on or before the due date specified for furnishing the return of income under sub-section (1) of section 139 of the Act.
Secondly, the assessee shall get its books of account audited for the previous years referred to in clause (i) by any accountant specified in the Explanation below sub-section (2) of section 288 of the Act and furnish the Audit Report at least 1 month prior to the due date specified for furnishing the return of income under of section 139(1) of the Act.
Thirdly, the assessee shall furnish a quarterly statement within one month from the end of each quarter electronically in Form II as annexed to the Circular No 15 of 2020, dated the 22 July, 2020 issued by the Central Board of Direct Taxes in respect of each investment made by it during the said quarter.
Fourthly, the assessee shall maintain a segmented account of income and expenditure in respect of such investment which qualifies for exemption under clause (23FE) of section 10 of the Act.
Fifthly, the assessee shall continue to be owned and controlled, directly or indirectly, by the Government of the Abu Dhabi and at no point of time any other person should have any ownership or control, directly or indirectly, in the assessee.
Sixthly, the assessee shall continue to be regulated under the law of the Government of Abu Dhabi.
Seventhly, the earnings of the assessee shall be credited either to the account of the Government of Abu Dhabi or to any other account designated by that Government so that no portion of the earnings inures to any private person.
Eighthly, the assessee does not and shall not have any loan, borrowing, advances, deposits or investment in it of any kind directly or indirectly from any person other than the Government of Abu Dhabi. The assessee shall only invest the surplus fund of the Government of Abu Dhabi and that Government shall not raise any loan, debt etc. directly or indirectly, from the market or any entity to make the said investment.
Ninthly, the asset of the assessee shall vest in the Government of Abu Dhabi upon dissolution.
Tenthly, the assessee does not and shall not undertake any commercial activity whether within or outside India other than the said investment or investment of similar nature.
Further, the assessee shall have monitoring mechanisms to protect the said investment with investee but shall not manage day to day operations of the investee or appoint executive directors in the investee company or participate in the decision making process or control them.
Lastly, the assessee shall not carry out asset management activity for any person other than itself.
The government notified that violation of any of the conditions as stipulated in the clause (23FE) and this notification shall render the assessee ineligible for the tax exemption.Subscribe Taxscan Premium to view the Judgment