FEMA residence and overseas investment protection turn on intention to stay and foreign-acquired assets under Section 6(4).

Residence under FEMA depends not only on the 182-day test but also on whether a person has come to or stayed in India with an intention to remain for an uncertain period; on the facts discussed, that broader statutory test treated the person as resident in India. Section 6(4) may protect an overseas investment if the asset was acquired, held or owned when the person was resident outside India, and the discussion notes that an investment in a Dubai venture may fall within that protection where it is plausibly traceable to foreign earnings or assets. The commentary also notes that related contravention findings may stand or fall depending on that residence determination and the availability of the Section 6(4) safeguard.

---

---

Issues: (i) Whether the appellant was a person resident in India at the relevant time under Section 2(v) of the Foreign Exchange Management Act, 1999. (ii) Whether the investment in the Dubai venture was protected by Section 6(4) of the Foreign Exchange Management Act, 1999 and whether the related penalty could stand.

Issue (i): Whether the appellant was a person resident in India at the relevant time under Section 2(v) of the Foreign Exchange Management Act, 1999.

Analysis: Residence under FEMA turns not only on the 182-day test but also on the statutory exclusions, including whether the person has come to or stayed in India in circumstances indicating an intention to stay for an uncertain period. The appellant had returned to India in May 2000 and continued to remain in India during the relevant interregnum. The asserted links with Dubai, including a resident visa, foreign business activity, and foreign bank accounts, were not accepted as determinative of the statutory test. The surrounding circumstances were held to show an intention to stay in India for an uncertain period.

Conclusion: The appellant was held to be a person resident in India for the relevant period, and the findings on the other contraventions based on that status were sustained.

Issue (ii): Whether the investment in the Dubai venture was protected by Section 6(4) of the Foreign Exchange Management Act, 1999 and whether the related penalty could stand.

Analysis: Section 6(4) permits a person resident in India to hold, own, transfer, or invest in foreign currency, foreign security, or immovable property outside India if the asset was acquired, held, or owned when the person was resident outside India. The appellant had stayed in Dubai shortly before the investment, the venture was set up soon after his return, and the investment was not shown to have been made in cash. In those circumstances, the possibility that the investment was made from earnings acquired abroad could not be ruled out. The charge was therefore not established.

Conclusion: The penalty relating to the investment in the Dubai venture was set aside, and this charge was held not proved.

Final Conclusion: The appeal succeeded only in part: four contraventions were upheld, one contravention was deleted, and the total penalty was correspondingly reduced.

Ratio Decidendi: For determining residence under FEMA, the decisive consideration is the statutory test of intention to stay in India for an uncertain period; and an investment outside India may be protected under Section 6(4) where it is plausibly traceable to assets or earnings acquired while the person was resident outside India.

---