Residence under foreign exchange law turns on intent to stay, and notification-based account exemptions can be denied.

Residence under the foreign exchange law turns on whether the surrounding circumstances objectively show an intention to stay in India for an uncertain period, not merely on the length of physical stay. On the facts noted, continued residence, non-renewal of passport after expiry, and family settlement in India supported resident status, making the failure to repatriate foreign balances a contravention. A notification for persons of Indian origin did not preserve foreign currency accounts abroad where its deeming provision treated such a person, on the stated facts, as permanently resident in India. The penalty was also upheld because the conduct showed no bona fide ignorance of law and the later repatriation did not erase the original breach.

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Issues: (i) Whether the appellant had become a person resident in India within the meaning of section 2(p)(iii)(d) and was liable to repatriate foreign exchange held abroad; (ii) Whether the notification relied upon entitled a foreign citizen of Indian origin to retain and operate foreign currency accounts outside India; (iii) Whether the penalty of Rs. 5 lakhs was excessive.

Issue (i): Whether the appellant had become a person resident in India within the meaning of section 2(p)(iii)(d) and was liable to repatriate foreign exchange held abroad.

Analysis: The relevant inquiry was not merely the length of stay in India but whether the surrounding circumstances showed an intention to stay in India for an uncertain period. The appellant had come to India in 1981, continued to stay here thereafter, did not renew his passport after expiry, and had family members settled and educated in India. On these facts, the circumstances indicated an intention to remain in India for an uncertain period from at least the date of passport expiry. Once that status was acquired, failure to repatriate the foreign balances within the prescribed time attracted section 14.

Conclusion: The appellant was rightly treated as a person resident in India and was liable for contravention under section 14.

Issue (ii): Whether the notification relied upon entitled a foreign citizen of Indian origin to retain and operate foreign currency accounts outside India.

Analysis: The notification contained an explanation deeming a person of Indian origin who had come to and stayed in India, in the relevant circumstances, to be a person permanently resident in India. The appellant, being of Indian origin and resident in India, fell within that deeming provision. The notification therefore did not afford him the exemption claimed.

Conclusion: The appellant could not claim the benefit of the exemption and the contravention finding was sustained.

Issue (iii): Whether the penalty of Rs. 5 lakhs was excessive.

Analysis: The circumstances relied upon to reduce the penalty did not establish bona fide ignorance of law. The appellant's continued residence, the magnitude of the foreign exchange involved, and the gain from devaluation were relevant aggravating factors. The amount had been repatriated later, but that did not make the original contravention inconsequential. The penalty was within the permissible norm under section 50.

Conclusion: The penalty was not excessive and called for no interference.

Final Conclusion: The appeal failed in full, and the adjudication order imposing penalty was maintained.

Ratio Decidendi: For determining residence under section 2(p)(iii)(d), the decisive test is whether the circumstances objectively indicate an intention to stay in India for an uncertain period; once that status exists, the notification-based exemption for foreign exchange accounts may be denied by a deeming provision applicable to persons of Indian origin.

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