TaxTMI 
TaxTMI 
2025 (6) TMI 536
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....ese, Noticee No. 2, for contravention of Regulation 4 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 r.w. Regulation 6 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, section 42(1) of the Foreign Exchange Management Act, 1999- Penalty of Rs. 1,00,000/- (Rupees one lakh only). iii. On Shri Shabu, Noticee No. 3, for contravention of Regulation 4 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 r.w. Regulation 6 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 and section 42(1) of the Foreign Exchange Management Act, 1999 - Penalty of Rs. 1,00,000/- (Rupees one lakh only). 2. As per the facts of the case, information was received that Shri Ullattil Jossy Joseph, an NRI based in Switzerland, purchased agricultural land and constructed a hotel by name "Zurich International" in Kuruppumthara, Kottayam District, in violation of the provisions of Foreign Exchange Management Act, 2000 & Rules and Regulations made under. Shri Jossy Joseph in his statement recorded on 01.11.2010 u/s 37 ....
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....Joseph. Shri Varghese had also surrendered documents showing the source of fund and swift document indicating the transfer of US$ 55,29,284 to Switzerland. Shri Jossy Joseph was again examined on 26.05.2011. He stated that he had sold the hotel and land to M/s Royal Golf Hotels India (P) Ltd. for an amount of Rs. 1525 lakh. He further added of the total landed property involved is 466 cents, out of this his wife Chinnamma is owner of 247 cents of land. He submitted that he had instructed K.P. Varghese to transfer Rs. 250 lakh equivalent to US$ 559284 to the joint account no. 13007543069 of himself and his wife with Zurich Kantal Bank, Zurich, Switzerland. The rest of the amount he had received in India. He further added that from the 250 lakh amount transferred by Shri Varghese to Switzerland, he had brought back to India Rs. 47,78,287 on 18.02.2011 and Rs. 43,57,335/- on 10.03.2011 i.e. total Rs. 91,35,618/- in his NRE account in State Bank of Travancore, Kuruppumthara. He also submitted that he used to visit Switzerland for every short period and his 2 children are studying in India. He further added that his wife and one son (Jax) was in Switzerland. He had submitted that no pe....
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....hs. Out of this Rs. 250 lakhs was paid by way of transfer of US$ 559284 to Swiss Account of Smt. Alice and Shri Jossy as per direction of Shri Jossy by Shri K.P. Varghese, the Managing Director of the Company, through Dhanalakshmi Bank and the remaining 200 lakhs was paid to Shri Jossy. M/s Royal Golf Hotel Resorts (P) Ltd have transferred Rs. 250 lakhs to the Swiss account of Smt. Alice & Shri Jossy and for it the Company/Managing Director Shri K.P. Varghese has drawn US$ 559284 from Dhanalaxmi Bank. Accordingly, it was concluded that the drawal of US$ 559284 equivalent to Rs. 250 lakhs by Royal Golf Hotel Resorts (P) Ltd/its Managing Directors is in contravention of Regulation 4 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations 2000 r.w. Regulation 6 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000 and its Directors Shri K.P. Varghese and Shri Shabu are also liable for the aforesaid contravention in terms of section 42(1) of FEMA. Penalty was imposed accordingly, by the Adjudicating Authority vide order dated 15.09.2014, as mentioned in para no.1 above. Aggrieved by the said order date....
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....cted the appellant (Mr. K.P. Varghese) to transfer the sum of Rs. 250 lakhs to the joint account of the Noticee No. 4 & 5 with the Zurich Kantal Bank, Zurich, Switzerland, and thus, the appellants deposited the amount in foreign joint account of Shri Jossy Joseph and Smt. Alice towards the repatriation of the amounts so brought in by the Noticee Nos. 4 & 5. Further, it is submitted that the purchasers (Appellant) had surrendered equal amount of FCNR Receipt to his NRE account and thus, there is no foreign exchange loss. Also, the advance payment was made through the Authorised Dealer Bank and the advance payment made is thus only a technical defect and ought to be condoned thereby. Further, there is also no evidence that the amount transferred to Switzerland account is a payment to Smt. Alice and it is only a surmise on which the Adjudicating Authority has based its findings. The transfer made was towards the share of Shri Jossy Joseph for the amounts brought in by him for the construction of the hotel and moreover, imposition of penalties cannot be based on presumptions. Further, it is submitted that the substantial portion of the amount transferred outside has already been brou....
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...., 2000 read with Regulation 6 of FEM (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, because the transaction involved in the present case is Capital Account transaction and as per Regulation 4 of the Foreign Exchange Management (Permissible Capital Accounts Transactions) Regulation, 2000, the drawing of foreign exchange from any authorized person for any capital account transaction is prohibited except to the extent of permissions given as per the Rules, Act, and Regulations. The permissible capital account transactions of a person resident in India and of a person resident outside India are specified in the Schedule 1 and 2 respectively of the said Regulation and none of the Entries in the said Regulation covers the instant transaction. The repatriation of the sale proceeds of the immovable property owned by the non-resident is an action to be undertaken by the non-resident himself. Since the transaction is being done in the country, the payment of consideration by the buyer also has to be done within the country itself and the non-resident seller may repatriate the amount so received in sale consideration to the extent of the amount so eligible in ter....
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....e Management (Permissible Capital Account Transactions) Regulations, 2000, Prohibitions- 'save as provided in the Act, rules or regulations made thereunder, (a) no person shall undertake or sell or draw foreign exchange to or from an authorized person for any capital account transaction". As per Section 2(e) of FEMA, Capital Account Transaction includes transaction referred to in Sub-section 3 of Section 6 and acquisition or transfer of immovable property in India, other than a lease not exceeding 5 years by a person resident outside India is transaction specified in Sub-section (3) of Section 6 at clause (g). Regulation 6 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, "6. (a) A person referred to in sub-section (5) of section 6 of the Act, or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section. (b) In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India who is a citizen of India or a person of In....