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2019 (9) TMI 666 - AT - FEMAPurchase of property in India - Individual arrived in India on Business Visa - Person resident in India as contemplated under Section 2(v) of the Foreign Exchange Management Act, 1999 - THAT - Appellants residing in India for more than 182 days in the previous financial year at the time of setting up of business and purchase of property in India. Thus, they satisfied the definition of the term Person resident in India as contemplated under Section 2(v) of the Foreign Exchange Management Act, 1999 and therefore there was no impediment to purchase and hold property in India nor did they require any permission from the Reserve Bank of India to purchase immovable property or to set up any business in India. The property was purchased on 01.09.2009 more than a year after they entered India under a valid Visa. It is specifically alleged that the documents/allegations as made out in the complaint/ Impugned order are vague as nothing was placed on record to show that ₹ 2,15,21,972/- was brought in India in violation of FEMA. The appellants issued a valid Business Visa by the Embassy of India, Seoul which Business Visa was valid from 28.07.2008 to 27.07.2009 and thereafter from 17.08.2009 to 16.08.2010 and on subsequent dates. Both entered India on 08th August 2008 and continuously stated in India till 17.07.2009 when they left India and came back after obtaining a fresh Business Visa for the period 17.08.2009 to 16.08.2010. It is further confirmed in the impugned order. Copy of passport of the Appellants with the relevant Business Visa and stamp of the Immigration Department for arrival and departure on the respective dates have been filed alongwith written submissions as Document no. 1. They purchased the immovable property on 01.09.2009, they had fulfilled the requirement of Person Resident in India as defined under section 2(v) of the Foreign Exchange Management Act, 1999 by continuously residing in India from 08th August, 2008 till 31.03.2009 for more than 182 days during the preceding Financial Year i.e. 2008-2009. Before they purchased the immovable property, had written a letter to the Reserve Bank of India on 06.08.2009 requesting for permission to purchase the property and for constructing a building thereon. The Reserve Bank of India vide their letter dated 26.08.2009 bearing no. FE.CO.FID/5396/10.51.000/2009-10 had confirmed under Section 2(v) of the FEMA, 1999 that the Appellants do not require the approval from the RBI from the FEMA angle and that they would have only to prove his/her residential status if required, by any Authority. Therefore, before purchase of the immovable property, the appellants had approached the RBI seeking permission. In view fo the reply of the RBI vide the afre said letter, the Appelalnt had only to satisfy Section 2(v) of FEMA, 1999, and no prior approval was required on the date when they ahd purchased the immovable property. Copy of the RBI letter is enclosed Documents no.2. This fact has been noted by the Adjudicating Authority (internal page 6, paragraph No. 18 (6)) while passing the impugned order. The test as contemplated under Section 3(c) of FEMA has not been met. The Respondents failed to establish all the three (3) necessary ingredients to show any violation, the ingredients being that there was a receipt of payment; the receipt was otherwise than through an authorized person and the receipt was by Order or on behalf of any person resident outside India. In the impugned order contentions and documents referred by the appellants have not been dealt with. It has come on record that the Trust was setup by the Appellants for a charitable purpose of providing shelter and education to children belong to backward and poor class irrespective of caste, creed or religion and Appellants have agreed to hand over the property to a Trust which has been set up comprising of Indian trustees who have given their consent to act as trustees and carry on with the objectives of the trust. Thus, there is no violation of FEMA - Appeal allowed.
Issues Involved:
1. Whether the appellants contravened the provisions of various FEMA regulations by establishing a firm, receiving foreign donations, and purchasing immovable property without requisite permissions. 2. Whether the appellants were "Resident Indians" and thus entitled to acquire properties in India. 3. Validity of the penalties and confiscation ordered by the Respondent authority. Issue-Wise Detailed Analysis: 1. Contravention of FEMA Regulations: The appellants were alleged to have violated Regulation 3 of the Foreign Exchange Management (Establishment in India of branch or business or other place of business) Regulations, 2000, Regulation 5 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, Regulation 3 of the Foreign Exchange Management (Investment in firm or proprietary concern in India) Regulations, 2000, and Regulation 8 of the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000. The violations pertained to establishing a firm without RBI permission, receiving foreign donations amounting to ?2,15,21,972, and purchasing immovable property worth ?71,83,982 without requisite permissions. 2. Residential Status of Appellants: The appellants contended that they were "Resident Indians" as they had resided in India for more than 182 days in the previous financial year, satisfying the definition under Section 2(v) of FEMA. They argued that this status entitled them to acquire properties in India without needing RBI permission. The appellants provided evidence of their continuous stay in India from 08.08.2008 to 31.03.2009 and subsequent periods, substantiated by their passports and visas. 3. Validity of Penalties and Confiscation: The Respondent authority imposed penalties and ordered confiscation of properties based on the alleged violations. The appellants argued that the order was illegal, not a speaking order, and lacked application of mind. They emphasized that the RBI had confirmed that no prior approval was required if they satisfied the criteria under Section 2(v) of FEMA. The appellants also highlighted that the funds for the property purchase were received through legal channels, as evidenced by FIRC certificates, and the firm was assessed for income tax from 2010-2011 to 2017-2018. Judgment: The Tribunal found that the appellants had indeed resided in India for more than 182 days in the preceding financial year, thus qualifying as "Resident Indians" under Section 2(v) of FEMA. The RBI's letter confirmed that no prior approval was required if this condition was met. The funds for the property purchase were received through legal channels, and the appellants were assessed for income tax, further supporting their compliance with FEMA regulations. The Tribunal concluded that there was no violation of FEMA regulations by the appellants. Consequently, the appeal was allowed, and the order of confiscation and penalties imposed by the Respondent authority was set aside as it was passed against the law and facts. Conclusion: The Tribunal's decision underscored the importance of the appellants' residential status and compliance with legal channels for fund transfers. The judgment highlighted that the appellants had fulfilled the necessary criteria under FEMA, and the Respondent authority's order lacked proper consideration of the appellants' contentions and evidence. The appeal was allowed, and no costs were imposed.
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