Section 3 — Explanation renumbered as Explanation 2 thereof by s

Explanation renumbered as Explanation 2 thereof by s. 4, ibid. (w.e.f. 1-4-1977). 64 1[9A. Certain activities not to constitute business connection in India.—(1) Notwithstanding anything contained in sub-section (1) of section 9 and subject to the provisions of this section, in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund. (2) Notwithstanding anything contained insection 6, an eligible investment fund shall not be said to be resident in India for the purpose of that section merely because the eligible fund manager, undertaking fund management activities on its behalf, is situated in India. (3) The eligible investment fund referred to in sub-section (1), means a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfils the following conditions, namely:— (a) the fund is not a person resident in India; (b) the fund is a resident of a country or a specified territory with which an agreement referred to in sub-section (1) of section 90 or sub-section (1) ofsection 90A has been entered into 2[or is established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf]; (c) the aggregate participation or investment in the fund, directly or indirectly, by persons resident in India does not exceed five per cent. of the corpus of the fund; (d) the fund and its activities are subject to applicable investor protection regulations in the country or specified territory where it is established or incorporated or is a resident; (e) the fund has a minimum of twenty-five members who are, directly or indirectly, not connected persons; (f) any member of the fund along with connected persons shall not have any participation interest, directly or indirectly, in the fund exceeding ten per cent.; (g) the aggregate participation interest, directly or indirectly, of ten or less members along with their connected persons in the fund, shall be less than fifty per cent.; (h) the fund shall not invest more than twenty per cent. of its corpus in any entity; (i) the fund shall not make any investment in its associate entity; (j) the monthly average of the corpus of the fund shall not be less than one hundred crore rupees: Provided that if the fund has been established or incorporated in the previous year, the corpus of fund shall not be less than one hundred crore rupees at the end of such previous year: 3[Provided further that nothing contained in this clause shall apply to a fund which has been wound up in the previous year;] (k) the fund shall not carry on or control and manage, directly or indirectly, any business in India 4***; (l) the fund is neither engaged in any activity which constitutes a business connection in India nor has any person acting on its behalf whose activities constitute a business connection in India other than the activities undertaken by the eligible fund manager on its behalf; (m) the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the arm’s length price of the said activity:

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