Purchase of Residential Property in India can Construed as Intention to Stay in India for Uncertain India
Held by Hon’ble APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
In the matter of
Union of India Vs. Mr. Robert Lawrence
The Respondent is a British Citizen and bought 2 immovable properties in India in 2003-2004. The Appellant contended that on the date of purchase of immovable property, the Respondent was not a “Person Resident In India” under Section 2(v) of FEMA. Accordingly, as per Regulation 8 of the Regulation, the respondent is not permitted to purchase the immovable property in India without prior approval of the RBI. Further, Section 2(v) of FEMA goes beyond the mandatory condition of 182 days. The intention and objective of the notices to stay in India is to be backed by valid material, and is also an important criterion to decide the residential status of the notices. Mere purchase of a residential unit in India cannot establish their intention to stay in India for an uncertain time.
Hon’ble Tribunal Held that the respondent has acquired residential premises in India, and visiting and staying in India regularly make it clear that he is coming to stay in India for an uncertain period for residence. On the date of proceedings before SD (Appeals), the Respondent has been staying in his residential properties for more than 18 Years and is also involved in various charitable activities in India. Based on these facts, they have purchased residential property in India, It was concluded by the Special Director (Appeals) that they intend to stay in India for an uncertain period.
The respondent is rightly held to be entitled to purchase a residential premises, and he has not contravened any law by purchasing the same.
1. Brief facts of the case:
- The Appeal is filed by the Union of India under the Foreign Exchange Management Act, 1999 (“FEMA”) against the order of Special Director (Appeal) wherein the SD(Appeals) set aside the order of Adjudicating Authority (“AA”).
- The investigation was initiated by the Directorate of Enforcement (“ED”) on the intimation that Mr. Robert Lawrence (“The Respondent”) has purchased the immovable property in Goa in contravention of the provisions of FEMA.
- A Show Cause Notice was issued to the respondent for contravention of provisions of Section 6(3)(i) of FEMA read with Regulation 8 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulation, 2000 (“The Regulations).
- As per the SCN, the respondent did not fulfil the criteria of a Person resident in India and acquired the following 2 immovable properties in India without requisite permissions:
Nature of PropertyStateDate of Sales DeedConsiderationResidential Property-1Goa28.03.200315,34,660/-Residential Property-2Goa19.01.20055,00,000
- The matter was adjudicated by AA wherein a penalty was imposed of INR 4 Lacs, and respective properties were also confiscated.
- Aggrieved by the order, the Noticee filed an appeal with SD (Appeals), and thereby the order of penalty and confiscation was cancelled.
- Aggrieved by the order of SD (Appeals), the Appellant Union of India filed an appeal before the Appellate Tribunal under SAFEMA at New Delhi.
2. Relevant Legal Extract
Relevant Legal Extract is reiterated below for ready reference:
- Section 2(v) of the Foreign Exchange Management Act, 1999, is reiterated below:
“person resident in India” means-
“(i) a person residing in India for more than one hundred and eighty-two days during the preceding financial year, but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation, or
(c) for any other purpose, in such circumstances as would indicate his
Intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period”;
- Regulation 8 of the Foreign Exchange Management (Acquisition and Transfer of Immoveable Property in India) Regulations, 2000 states that-
“Save as otherwise provided in the Act or Regulations, no person resident outside India shall transfer any immoveable property in India:
Provided the Reserve Bank may, for sufficient reasons, permit the transfer, subject to such conditions as may be considered necessary”.
3. Contention of the Appellant:
The Appellant Contended that:
- A “Person resident outside India” is not allowed to acquire any immovable property in India except with the express permission of the RBI.
- Mr. Robert did not satisfy the residency criteria as contemplated in Section 2(v) of FEMA, therefore, the purchase of residential properties in India is in contravention of the provisions of FEMA.
- With respect to Residential Property-1, based on documents, on the date of presentation of the Sale Deed or the date of actual payments, the Respondent was not a ‘person resident in India’ and he did not obtain permission from the RBI for the purchase of immovable properties.
- Therefore, by purchasing the aforesaid two immovable properties, the Respondent has violated the provisions of Section 6(3)(i) of the FEMA and Regulation 8 of the Regulations.
- Further, provisions of Section 2(v) of FEMA go beyond the mandatory condition of 182 days.
- The intention and objective of the notices to stay in India is backed by valid material is also an important criterion to decide the residential status of the notices.
- Mere purchase of a residential unit in India cannot establish their intention to stay in India for an uncertain period of time.
- As per his own admission, the Respondents came to India to enjoy their retirement life, and they were not pursuing any business of profit in India, but they were holidaying in India.
- These facts go on to confirm that the Respondents were not in India for any unspecified period, but were in India for a specified period and thus, did not fulfill the twin resident ship criteria as contemplated under section 2(v) of the Foreign Exchange Management Act, 1999 and thus the contraventions stand clearly proved.
4. Analysis by Hon’ble Appellate Tribunal
Hon’ble Appellate Tribunal held that:
- The Respondent has stayed in India for more than 182 days in the preceding Financial year.
- The only question that arose for decision is whether the requirements of Section 2(v)(i)(B) in as much as the law requires that the person should be in India , either for:
- Taking up employment in India;
- carrying on business or vocation in India;
- for any other purpose, which in the circumstances would indicate his intention to stay for an uncertain period.
- In the given case, the Respondent is a British Citizen and has been coming to India from 1988 onwards.
- As per documents, the Respondent and his wife were in India for the better part of every financial year from the year 2001-2002 and 2006-07.
- Also, the respondent has acquired residential premises in India, and visiting and staying in India regularly make it clear that he is coming to stay in India for an uncertain period for the purpose of residence.
- On the date of proceedings before SD (Appeals), the Respondent has been staying in his residential properties for more than 18 Years and is also involved in various charitable activities in India.
- On the basis of these facts, they have purchased residential property in India, It was concluded by the Special Director (Appeals) that it is clear that they intend to stay in India for an uncertain period.
- Thus, in the circumstances, the Respondent and his wife, having stayed in India for a period exceeding 182 days in the preceding financial years, and the circumstances show his intention to stay for an uncertain period.
- The respondent is rightly held to be entitled to purchase a residential premises, and he has not contravened any law by purchasing the same.
5. Final Order
Hon’ble Appellate Tribunal held that:
- Ld. Special Director (Appeals) has passed a well-reasoned and detailed order for setting aside the order passed by the Adjudicating Authority, and hence, the same does not require any interference.
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