(1) For the purposes of clause (23F) of section 10, the prescribed authority shall be the Director of Income-tax (Exemp­tions) having jurisdiction over the venture capital fund or the venture capital company who makes application for approval under sub-rule (2).

(2) An application for approval shall be made in Form No. 56A by a venture capital fund or a venture capital company to the Director of Income-tax (Exemptions) referred to in sub-rule (1).

(3) Every application under sub-rule (2) may be made in any previous year in which any income by way of dividend or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a ven­ture capital undertaking shall not be included in computing the total income of such venture capital fund or venture capital company.

(4) Every application for approval under sub-rule (2) shall be accompanied by the following documents, namely :—

(a) a copy of trust deed or certificate of incorporation under the Companies Act, 1956 (1 of 1956);

(b) balance sheets and profit and loss account for three previous years immediately preceding the previous year in which the application is made;

(c) Forms 56B and 56C duly filled in and signed by the applicant; and

(d) a copy of the certificate of registration issued by the Securities and Exchange Board of India.

(5) The Director of Income-tax (Exemptions) shall approve the ven­ture capital fund or the venture capital company, as the case may be, subject to the following conditions, namely :—

(a) the venture capital fund or the venture capital compa­ny, as the case may be, is registered with the Securities and Ex­change Board of India established under section 3 of the Securi­ties and Exchange Board of India Act, 1992 (15 of 1992);

(b) * * *

(c) * * *

(d) a venture capital fund or a venture capital company, as the case may be, shall not invest more than 55[twenty] per cent of its total monies raised or total paid-up share capital in one venture capital undertaking;

(e) a venture capital fund or a venture capital company, as the case may be, shall not make investment of more than forty per cent in the equity capital of one venture capital undertaking;

(f) every venture capital fund and venture capital company, shall maintain books of account and get such books audited by an accountant, as defined in Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Director of Income-tax (Exemp­tions) before the due date of filing of the return under sub-section (1) of section 139.

(6) The Director of Income-tax (Exemptions) shall pass an order in writing granting approval or refusing approval to the venture capital fund or venture capital company, as the case may be :

Provided that the Director of Income-tax (Exemptions) shall not refuse the approval except in concurrence with the Director-General of Income-tax (Exemptions):

Provided further that every venture capital fund or venture capital company, as the case may be, shall be given an opportuni­ty of being heard before passing an order under this rule.

(7) The Director of Income-tax (Exemptions) shall withdraw the approval granted under sub-rule (6) in the following circum­stances, namely :—

(a) if the venture capital fund or the venture capital company—

(i) fails to make investments in the manner specified in sub-rule (5);

(ii) invests more than twenty per cent of the monies raised by a venture capital fund or twenty per cent of paid-up share capital of the venture capital company, as the case may be, in one ven­ture capital undertaking;

(iii) makes an investment of more than forty per cent in the equity capital in one venture capital undertaking;

(iv) fails to maintain books of account and get such ac­counts audited by an accountant or fails to file the audit report required in clause (f) of sub-rule (5);

(v) violates the provisions of the Act or rules made there­under;

(b) if the certificate of registration granted under sec­tion 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), to a venture capital fund or a venture capital company is suspended or cancelled by the Securities and Exchange Board of India.