Delhi HC Quashes ED's NOC Rejection Required Under FEMA - Overseas Investments
CA Gaurav Garg
Chairman, NIRC of ICAI [2023-24] I Transfer Pricing I NR Taxation I Income Tax I Chartered Accountant I Student of Vedic Astrology
In the matter of Times Internet Ltd. (W.P.(C) 15242 & 15471 of 2023) Hon'ble Delhi High Court delivered an important ruling, quashing the Directorate of Enforcement’s (ED) rejection of No Objection Certificates (NOCs) sought by Times Internet Ltd. (TIL) and Bennett Coleman & Co. Ltd. (BCCL) for overseas investments into their Wholly Owned Subsidiaries (WoS). The Court observed that the denial of NOCs lacked substantive reasoning and violated principles of natural justice.
Brief Facts
Both TIL and BCCL, subsidiaries of the Times of India Group, which had established WoS abroad to facilitate international operations and investments. Both companies sought NOCs under the Foreign Exchange Management (Overseas Investment) Rules, 2022, to remit funds to their respective WoS. However, the ED alleged irregularities in past overseas investments, including the overvaluation of shares in MX Media Co. Ltd., leading to an alleged diversion of foreign exchange. Despite issuing summons to the companies in 2021, no formal proceedings or charges were initiated by the ED.
The Petitioners (TIL and BCCL) argued that the denial of NOCs was arbitrary, lacked clear reasoning, and was contrary to the liberalized framework introduced by the FEMA OI Rules, 2022. They emphasized their compliance with all regulatory requirements and maintained that the new rules necessitate substantive evidence to justify the denial of NOCs.
领英推荐
Key Observations of the Court
Based on the above observation, the rejection letters issued by ED on October 30, 2023, and November 15, 2023, were quashed by the Court.
International Tax & FEMA Consultant, Litigation by passion, Public Speaker, Senior managing partner at Abhangi & Abhangi LLP
2 个月Very helpful ??
Chartered Accountant | AKM Global | Direct Tax Litigation | Corporate Tax | Business Development | Advisory| Writer | Singer |
2 个月Thank you for sharing, Gaurav Sir. Beautifully articulated! In my view, this could provide significant relief, though much will depend on whether the Hon’ble Supreme Court also delivers a favorable judgment. Given the likelihood of the tax department challenging the same, the final outcome remains critical!"