TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 677
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....e RBI had intimated to the ED that investment made into the company account by debiting the NRO account of Mr. Leonid Beyzer is not a permissible mode of foreign direct investment as per the prevailing regulations regarding foreign investment in India as per Notification No. 20/2000-RB dated 03.05.2000 issued under the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations 2000 as amended. As per the master circular No. 2/2006-07 dated 01.07.2006 a company issuing shares to a person resident outside India have to comply with the following: a. Payment for purchase of shares and debentures should be by way of inward remittances in foreign exchange through the normal banking channel, b. After issue of shares the Indian company has to file a report in form FC-GPR not later than 30 days from the date of issue of shares to the regional office of RBI under whose jurisdiction the company is registered. 3. In the present case, with regard to the 1 (one) share of Mr. Leonid Beyzer it was held that there was contravention of the RBI instructions, in as much as the investment amount of Rs. 33,10,000/- did not come through the normal bank....
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....used to purchase the agricultural land as the same is prohibited under the relevant FEMA Regulations. (ii) The Appellant is an Indian Company which was set up on 18.03.2005, whose Directors are foreign nationals and whose shareholding is entirely held by foreign nationals. One Mr. Valiulin Rashid and Mr. Leonid Beyzer being citizens of Russia acquired the Appellant Company by foreign direct investment under the automatic route. The shares of the Appellant Company were purchased by Mr. Valiulin Rashid for a total payment of Rs. 2,29,27,811/-; out of which Rs. 33,10,000/- (US $ 77471) made from the NRO account of Mr. Leonid Beyzer and the balance of Rs. 1,96,17,811/- (US $ 449881) through direct receipt into the Company's account. (iii) It is submitted that there is no dispute as regards the payment of Rs. 1,96,17,811/- as the above FDI came through the proper banking channel. The dispute is only in respect of Rs. 33,10,000/- which came from abroad, but it came to the NRO a/c of Mr. Beyzer. Mr. Beyzer then transferred the above remittances from his personal account to the account of M/s. True Axiz Resorts (P) Ltd., during the period from 19.03.2005 to 12.12.2005. The appellants a....
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....he remaining amount came on later dates upto December, 2005. The above money came first to the NRO account of Mr. Leonid Beyzer and thereafter, it was transferred to the company account. It did not come to the NRE account (Non Resident - External Rupee account) or FCNR [Foreign Currency (Non Resident) Account]. The purpose of the above rule is to only ensure that the funds which are being used come from abroad and that it is not the money which is lying in the NRO account. It is stated that the above object is satisfied as it is clearly established that the above money has come from abroad and therefore, the essential condition that only the FDI should be used has been satisfied and therefore, no penalty should be imposed on this ground. (vi) The other charge is that the appellants have not filed that FC-GPR report within the stipulated period of 30 days from the date of receipt of the amount of consideration. It is submitted that there has been a delay in filing the above Report as the Directors were foreign nationals and were not very familiar with English language and this report was filed by them on 31.10.2005 and there is a delay of about 6 months. It may also be noted that ....
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....7 itself from agricultural land. The conversion letter dated 20.05.1996 issued by the Town and Country Planning Department, Govt. of Goa clearly shows that the land use is settlement and the application for the same, the Electricity Bills for the same were enclosed. NOC dated 11.10.2005 for the re- construction given by the Town and Country Planning Department, Govt. of Goa was also enclosed alongwith the Occupancy Certificate for the above property and the Completion Certificate. From the above, it is very clear that the above property is settlement and the above land use had been changed in 1996 itself and this land cannot be called as agricultural land at all and various constructions and renovations have been done on this property after the due approvals from the various govt. bodies and the approval of the designs and drawings for the same. (b) Survey No. 22-4 (565 sq. m) and Survey No. 18-3 (435 sq. m) purchased on 27.10.2005 for a consideration of Rs. 7 lacs. It is to be noted that majority of the land has been given to the Panchayat. A road has been constructed on it by the Panchayat which only provides the access to the first Property being the Survey NO. 22/3-B and no....
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....es for which Automatic Route of RBI for investment by person resident outside India is not available (B) List of activities or items for which FDI is prohibited. (C) Retail Trading (D) Atomic Energy (E) Lottery Business (F) Gambling and betting (G) Housing and real estate business (H) Agriculture (excluding Floriculture, Horticulture, development of seeds, animal husbandry, pisciculture and cultivation of vegetables, mushrooms etc., and Plantations.) From a perusal of the above notification, it is clear that what is prohibited is carrying out only the activity of agriculture and mere purchase of agriculture land is not prohibited, even assuming the land to be agriculture land. There is no finding in the impugned order that the appellants were carrying out the activity of agriculture on the land purchased by them. It may be kept in mind that the object of setting up of the present company was to invest and start tourism related projects or resorts. (xi). The Government of Goa had initially approved of a regional plan for the year 2011 where the conversion of land was permissible. The survey plan clearly displayed the existence of settlement dwellings in the lands p....
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....ation and even now they have not been able to produce any such permission or compounding order in their favour issued by the RBI. Accordingly, their investment has not been treated as investment through the legal channels as that is a mandatory requirement. (c) Mr. Leonid Beyzer even though has only one share had not taken prior approval of the Government of India inspite of having investment in another company in the same sector. This has contravened the provision of the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations 2000. As per Regulation 5 para 1 (2) of Schedule 1 which read as under: "if the person purchases the share under this scheme proposes to be collaborator or proposes to acquire the entire share holding of a new company, he should obtain a prior permission of Central Government if he has a previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company issuing the shares is engaged." (d) That the lands acquired were all agricultural land ....
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....to the condition that the company may ensure that all issues of shares/convertible debentures to non resident investors have been reported to RBI under the extant provisions of FEMA. There is a foot note in the said letter which states that "this acknowledgment shall not be deemed or construed in any way as approval by the Reserve Bank for investment in the company, nor does it certify the correctness or completeness of Form FC GPR from the company. This acknowledgment is only for the purpose of having received Form FC GPR from the company. Reserve Bank reserves its rights to call for any further detail from the company including any documents it may deem fit as well as to return the Form FC GPR to the company in view of any discrepancies found therein". The appellants have not been able to produce any final decision in this regard so far. It is therefore apparent that the RBI has still not given them the clearance/permission. Accordingly, the charge against the appellants stands. Thirdly, the charge is that Mr. Leonid Beyzer had not taken prior approval of the Government of India inspite of having investment in another company in the same sector. A perusal of Schedule I Clause I ....