Rule 331: Approval for eligible capital issues
Rule 331 sets the approval procedure for a public company or mutual fund under the stated Schedule XV provisions. It identifies the application form and documents, a three-month advance filing requirement, investment milestones and accountant certification duties.
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Rule 331 - Procedure for approval under Paragraph (1)(z)(i) and (ii) of Schedule XV to the Act
(1) The Central Board of Direct Taxes, before granting approval to a public company under paragraph 1(z)(i) of Schedule XV to the Act or to a Mutual Fund under paragraph 1(z)(ii), of the said Schedule shall satisfy itself that for the entity mentioned in column B in the following Table, the application is made in the Form specified in column C with documents as mentioned in column D attached alongwith, and the application is filed within the time limit prescribed in column E thereof:
Sl. No. (A) Entity (B) Application Form (C) Documents to be attached with the application (D) Time limit for filing application (E) 1. Public company Form No. 189 (a) Copy of certificate of incorporation under the Companies Act, 2013 (18 of 2013); and (b) audited balance sheet, and profit and loss account, for three tax years immediately preceding the tax year in which the application is made, or for the period of its existence, whichever is lesser. Three months before "the eligible issue of capital," as referred to in paragraph 6(i) of Schedule XV to the Act. 2. Mutual fund Form No. 190. (a) Copy of certificate of registration issued by the Securities and Exchange Board of India; and (b) audited balance sheet, and profit and loss account, for three tax years immediately preceding the tax year in which the application is made, or for the period of its existence, whichever is lesser. Three months before the public issue. (2) The Board shall pass an order approving or denying the application, but any decision denying approval shall not be made without providing the applicant a reasonable opportunity of being heard.
(3) Every applicant shall invest all its total paid-up capital, raised through equity issue or debentures, in the following manner:– (a) at least 25% of the capital raised shall be invested– (i) in the infrastructure facility, in the case of a public company, and (ii) in the eligible issue of capital of any company referred to in paragraph (6)(i), of Schedule XV to the Act in the case of a Mutual Fund; (b) such investment shall be made before the end of one year from the date of approval of the Board; and (c) the rest of the capital shall be invested in like manner within three years from the date of approval.
(4) Every applicant shall submit a certificate from an accountant, as defined in section 515(3)(b), specifying the amount invested in each tax year, from the date of approval of the Board.
(5) The Board shall have the power to withdraw the approval granted under sub-rule (2), if such applicant– (a) fails to make investments as per conditions mentioned in sub-rule (3); or (b) fails to file the certificate referred to in sub-rule (4).
Introduction
Approval is followed by continuing investment and certification obligations. Build the application and post-approval calendar together so the capital issue and later use of funds are properly documented.
Rule breakdown
Prepare the correct application and evidence
A public company attaches its Companies Act incorporation certificate; a mutual fund attaches its SEBI registration certificate. Both attach audited balance sheets and profit-and-loss accounts for the three preceding tax years or their existence period, whichever is shorter.
File before the issue and track the decision
The public-company deadline is three months before the eligible issue of capital referred to in Schedule XV paragraph 6(i). The mutual-fund deadline is three months before the public issue. The Board must provide a reasonable hearing opportunity before denying approval.
Plan the investment of the raised capital
Sub-rule (3) concerns the total paid-up capital raised through equity issue or debentures. At least 25% must be invested within the first statutory milestone: in the infrastructure facility for a public company, or in the specified eligible capital issue for a mutual fund. The balance must be invested in like manner within three years from approval.
Submit accountant certification and monitor continued compliance
Every applicant submits an accountant’s certificate specifying the amount invested in each tax year from approval. Keep capital receipts, investment evidence and certificates aligned. The Board may withdraw approval if the investment conditions or certificate requirement are not met.
Illustrative compliance calendar
For an approval dated 15 June, track the one-year milestone by reference to that approval date, and the separate three-year deadline for the balance. Record the tax-year allocations in the accountant certification rather than treating approval as the end of the compliance process.
Key takeaways
Different forms
Public companies use Form 189; mutual funds use Form 190, with the relevant registration or incorporation evidence.
Advance application
The table requires filing three months before the relevant eligible capital issue or public issue.
Investment milestones
At least 25% is invested before the end of one year from approval, and the rest within three years, in the specified manner.
Approval can be withdrawn
Failure to meet the investment conditions or file the required accountant certificate can lead to withdrawal.
Practical checklist
- Choose Form 189 or 190 according to the entity.
- Prepare the shorter-of-three-years financial record set.
- Calendar the pre-issue application and post-approval investment deadlines.
- Retain each accountant certificate and proof of submission.
Avoid
- Do not confuse the public-company and mutual-fund investment destinations.
- Do not assume approval removes continuing investment and reporting conditions.
FAQs
Which form does a public company use?
Form 189. A mutual fund uses Form 190, with the documents and filing timing specified in the table.
Can approval be denied without a hearing opportunity?
Sub-rule (2) requires a reasonable opportunity of being heard before a decision denying approval.
What can lead to withdrawal of approval?
Failure to make the investments under sub-rule (3), or failure to file the accountant certificate under sub-rule (4), are the grounds listed in sub-rule (5).