FEMA_Practicle Problems_3

Examine with reference to the provisions of the Foreign Exchange Management Act, 1999, the residential status of the branches mentioned below:
i NNM Ltd. an Indian Company having its registered office at Mumbai, India established a branch at New York U.S.A. on 1st April 2005.
ii DDI Ltd. a company incorporated and registered in London established a branch at Kanpur in India on 1st April 2005.
iii DDI Ltd. has a branch office at Singapore which is controlled by its Kanpur branch.

Section 2(u) defines a 'person'. As per this definition, the following shall be covered in the definition of a ‘person’:a. A companyb. Any agency, office or branch owned by a 'person'.Section 2(v) defines a 'person resident in India'. As per this definition, the following shall be covered in the definition of a 'person resident in India':

a. Any person or body corporate registered or incorporated in India.b. An office, branch or agency in India owned or controlled by a person resident outside India.c. An office, branch or agency outside India owned or controlled by a person resident in India.

The answer to the given problem is as under;

i
NNM Ltd. as well as the New York branch of NNM Ltd. is a 'person'. Therefore, residential status under FEMA shall be determined for each of them separately.
NNM Ltd. is incorporated in India. Therefore, it is a 'person resident in India'.
NNM Ltd. (a 'person resident in India') has established a branch outside India. Therefore, the New York branch of NNM Ltd. falls under the clause 'an office, branch or agency outside India owned or controlled by a person resident in India' and so the New York branch is a 'person resident in India'.

ii
DDI Ltd. as well as Kanpur branch of DDI Ltd. is a 'person'. Therefore, residential status under FEMA shall be determined for each of them separately.
DDI Ltd. (a foreign company) does not fall under any of the clauses of the definition of a 'person resident in India'. Therefore, DDI Ltd. is a person resident outside India.
The Kanpur branch of DDI Ltd. is a "person resident in India' since it falls under the clause 'an office, branch or agency in India owned or controlled by a person resident outside India'.

III
The Singapore branch of DDI Ltd., though not owned, is controlled by the Kanpur branch. The Singapore branch is a 'person resident in India' since it falls under the clause 'an office, branch or agency outside India owned or controlled by a person resident in India'.