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TMI Blog1982 (12) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... , came to be passed by the respondent can briefly be set out. The petitioner firm has been in existence since 1929. The firm originally consisted of Thiru A. M. M. Murugappa Chettiar, Thiru M. V. Aruna-chalam and A.M.M. Arunachalam. In 1965, the said Murugappa Chettiar died and thereafter his sons, M. M. Muthiah, A. M. M. Arunachalam and M. V. Arunachalam, became the partners of the firm. The firm owned several rubber estates in Malaya and was carrying on business as rubber planters besides money-lending business. Due to Japanese invasion, many of the rubber estates were damaged and there was also large scale community infiltration in those estates. After the withdrawal of the Japanese, the rubber planting business became impossible and the firm incurred heavy losses every year. The estates were, therefore, sold and a substantial portion of the sale proceeds also remitted to India and the balance remained in the bank account of the firm with the Chartered Bank, Kuala Lumpur. Under a notification dated March 25, 1947, issued under section 9, an obligation was cast on every person resident in India to whom the FERA, 1947, applied to surrender currency of the United States of America ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering itself liable to punishment for contravention of Exchange Control Regulations. As against the said letter dated October 20, 1970, Writ Petition No. 3823 of 1970 was filed by the petitioner. The petitioner also filed Writ Petition No. 3824 of 1970 for the issue of a writ of mandamus to the Reserve Bank to permit the firm to utilise the funds held in fixed deposit account in London for the purpose applied for by the firm. By way of interim orders, the court directed the Reserve Bank to permit the petitioner to transfer funds from the Chartered Bank, London, to the Chartered Bank, Singapore. Pursuant to that order, the funds were transferred to the Chartered Bank, Singapore, and are lying there as on date. Ultimately, the writ petitions were allowed holding that the petitioner's account was a pre-zero account and, therefore, it was entitled to the exemption from repatriation. As against the said judgment, the respondent filed Writ Appeal No. 75 of 1974. In the said writ appeal, permission was sought to file two additional notifications dated October, 1, 1973, and October 4, 1973, by which the distinction between pre-zero accounts and post-zero accounts had been removed. Based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the competent authority has power to cancel a notification issued earlier and that, therefore, the petitioner is not right in his submission that an exemption once given cannot be cancelled by a subsequent notification. According to the respondent, the notification dated June 15, 1977, does not purport to operate retrospectively but only operates in future The fact that the notification dated June 15, 1977, withdraws the exemption granted in relation to pre-zero accounts does not mean that the said notification is retrospective in operation. The respondent also contends that the petitioner cannot place reliance on the judgment of Ramaprasada Rao J. in Writ Petition No. 3823 of 1970 as the said judgment has been set aside by a Division Bench in writ appeal and that in any event that judgment in so far as it holds that the petitioner's account is a pre-zero account cannot be of any use to the petitioner as the distinction between pre-zero and post-zero account has been abolished and all the accounts expressed in foreign currency are now covered by the notification dated June 15, 1977. Therefore, it cannot be said that the respondent has purported to nullify the judgment of this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion the jurisdiction of the respondent to issue either the notification dated October 1, 1973, or the notification dated June 15, 1977. We would merely say that since the exemption has been given to pre-zero accounts by an earlier notification, that cannot be taken away by a subsequent notification. But the contention of the learned counsel overlooks the statutory provision contained in section 21 of the General Clauses Act, 1897, which clearly states that the power to issue a notification includes the power to add, to amend, vary or rescind the notifications from time to time. Therefore, the petitioner's contention that the exemption given under the earlier notification cannot be withdrawn by the issue of a subsequent notification cannot at all be accepted ; nor can we accept the petitioner's contention that the notification is issued with a view to nullify the orders passed by this court in the writ petition, as the earlier decision in the writ petition only dealt with the scope of an earlier notification granting exemption to pre-zero accounts and that does not deal with the power of the statutory authority to modify or alter the same by issuing a subsequent notification. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised dealer against payment in rupees, at the rate for the time being authorised by the Reserve Bank in pursuance of sub-section (2) of section 8 of the said Act for conversion into Indian currency of the foreign currency in which such foreign exchange is expressed. There is a proviso to the said notification and it says that the above order shall not apply to (1) such foreign exchange held by authorised dealers ; (2) persons authorised by the RBI to hold such foreign exchange for business or other purposes ; (3) maintenance of, and operation or any account in foreign currency maintained outside India, by foreign citizens in, or resident in, India but not permanently resident therein; (4) any sum held in any account in foreign currency, not being a sum expressed in pound sterling and held on or before July 8, 1947, if such account is maintained in pursuance of the general or special permission of the Reserve Bank ; (5) foreign exchange acquired or received in pursuance of permission granted by the Reserve Bank under section 8 or section 9; and (6) holding in India of foreign currency in the form of travellers' cheques, currency notes, bank notes and coins by foreign citizens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange resources of the country. Once a notification under section 9 is issued by Government, it becomes incumbent upon ' every person in, or resident in India, who owns or holds such foreign exchange as may be specified in the notification ' to offer it or cause it to be offered for sale to the Reserve Bank on behalf of the Central Government or to such person as the Reserve Bank may authorise for the purpose, within the period stipulated in the notification. No other provision of the Act casts a similar obligation on all those who happen to own or hold foreign exchange. For instance, section 4 provides, inter alia, that no person in, or resident in, India, shall buy or otherwise acquire or borrow or sell or otherwise transfer or lend, etc ., any foreign exchange, except to or from an authorised dealer. Unlike section 9, section 4 does not make it obligatory on any one to divest him self of the foreign exchange owned or held by him. It is also to be noted that section 9 applies not only to future acquisitions of foreign exchange but also to all such foreign exchange as is owned or held by any person at the date of the issue of a notification under that section." The above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia as being resident outside India to whom the FERA cannot apply and, therefore, the petitioner firm which is resident in Malaysia should be taken to fall outside the provisions of the Act. Per contra, Mr. V.K.T. Chari, learned counsel appearing for the respondent, contends that there is no definition of a "person" in the Act and a firm cannot be equated to a person, that normally the residence of the firm is to be determined with reference to the partners and, therefore, since the partners constituting the firm are residents of India, the firm also should be taken to be resident in India. The learned counsel also refers to the fact that the partnership as originally constituted has been dissolved by the death of one of the partners, Murugappa Chettiar, and, therefore, the original partnership which owned or held the foreign exchange should be taken to have been dissolved in which case the foreign exchange should be taken to have been held by the two individuals who now constitute the new partnership, and they being residents of India, the Act will squarely apply to them. Reliance is placed on section 42 of the Partnership Act, 1932, by the learned counsel and he submits that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are admittedly resident in India. As pointed out by the House of Lords in Sau Paulo'.(Brazilian) Rly. Co. Ltd. v. Carter (Surveyor of Taxes) [1895] 3 TC 407 (HL) and by the Supreme Court in CIT v. Nandlal Gandalal [1960] 40 ITR 1 (SC), the control and the management of the business is situate at the place where the head and brain of the trading adventure is situate. Control of a business does not necessarily mean the carrying on of a business and, therefore, the place where the trading activities or physical operations are carried on is not necessarily the place of control and management; nor is the business necessarily be controlled and managed at the place where the accounts are kept and the division of profits is decided on. In this case, it is not the case of the partners that they never exercise any control or supervision over the firm's business in Malaysia and the entire activities of the firm are controlled and managed by some other person independent of the partners and without reference to their directions and instructions. It was laid down by the Supreme Court in Erin Estate v. CIT [1958] 34 ITR 1 (SC), that control and management means de facto control an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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