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2014 (2) TMI 976 - HC - FEMAForeign exchange remittance - liaison office (‘LO’) in India - salaries and emoluments of the empaloyees are payable by the Head Office (‘HO’) - contravention of Section 8(1) of the Foreign Exchange Regulation Act (‘FERA’), 1973 - Held that:- The Court finds that both the AO and the AT erred in proceeding on the basis that the employees of the parent corporation, seconded to the Appellant, were ‘borrowed employees.’ There is no question of the Appellant being an ‘agent’ of Mitsubishi, Japan. The Appellant, as a LO, is not permitted to undertake any commercial activity. The letter dated 30th January 1976, issued by the RBI under Section 29(2) of the FERA granting permission to the LO to operate clearly states that the LO would only undertake the liaison activities relating to import/export trade, collection of commercial, industrial and other business information in Tokyo etc. and that “Excepting the said promotional work, the Indian offices will not undertake any activity of a trading commercial or industrial nature without the prior permission of the Reserve Bank of India.” Significantly, with the AO itself finding the Appellant not liable under Section 9(1)(c) of the FERA on the ground that there was no debt owed by the Appellant to the parent company, it could not have held that there was a liability owed by the LO to the parent company for the purposes of Section 8 (1) (b). AO dated 10th February 2004 and the impugned order dated 30th October 2007 of the AT set aside - Decided in favor of appellant.
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