Pranav B Prem

The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT) has rejected the claim of Flipkart co-founder Binny Bansal that he was a non-resident of India for the financial year 2019–20, and consequently denied him relief under the India–Singapore Double Taxation Avoidance Agreement (DTAA) in respect of capital gains arising from the sale of Flipkart shares. The Bench comprising Prashant Maharishi, Vice President, and Keshav Dubey, Judicial Member, held that Bansal failed to satisfy the statutory conditions necessary to be treated as a non-resident under the Income Tax Act, 1961. The Tribunal upheld the tax department’s determination that Bansal was a resident of India for the relevant year and was therefore liable to pay tax in India on the capital gains earned from the sale of his Flipkart shares.

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Bansal had contended before the Tribunal that he had relocated to Singapore for employment purposes and qualified as a person “being outside India, but coming on a visit to India”, thereby entitling him to non-resident status under Section 6(1)(c) of the Income Tax Act. He argued that his stay in India during the relevant financial year should be treated as a visit, attracting the benefit of Explanation 1(b) to Section 6(1)(c), which relaxes the 60-day threshold to 182 days in certain cases.

Rejecting this contention, the Tribunal noted that Bansal had stayed in India for 141 days during the financial year 2019–20 and had also satisfied the cumulative stay condition of more than 365 days in the four preceding years. The Bench held that the relaxation under Explanation 1(b) applies only to individuals who are already non-residents and does not extend to those who were residents in earlier years.

“On the basis of the above submissions and findings of fact, we hold that the assessee has been in India for more than 60 days and has satisfied the residential test under Section 6(1)(c) of the Act and is not entitled to the relaxation claimed,” the Tribunal observed.

Bansal had further argued that since he was a tax resident of Singapore during the relevant year, the capital gains arising from the sale of shares of Flipkart Private Limited, a Singapore-incorporated company, were not taxable in India and were protected under Article 13(5) of the India–Singapore DTAA. During the year, Bansal sold equity shares of Indian listed companies as well as shares of Flipkart Private Limited through multiple transactions, including sales to global investors such as Tiger Global and FIT Holdings SARL.

The Tribunal, however, held that once Bansal was found to be a resident of India under domestic tax law, he could not claim DTAA benefits to avoid taxation in India. Applying the tie-breaker tests under Article 4(2) of the DTAA, the Bench examined the availability of a permanent home, centre of vital interests, habitual abode, and nationality. It found that Bansal had substantial economic and personal ties with India, including immovable properties and long-standing business interests, which outweighed his relatively recent shift to Singapore.

The Tribunal also took note of the fact that Bansal is an Indian national and that his habitual abode and centre of vital interests continued to remain closely connected with India. On a cumulative application of the tie-breaker tests, the Bench concluded that Bansal was to be treated as a resident of India even under the DTAA framework.

While upholding the tax department’s position on residential status and taxability of capital gains, the Tribunal granted limited relief to Bansal by directing the Assessing Officer to verify and reissue a pending refund of over ₹5.8 crore, if the amount had not already been credited to him.

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In the result, the Tribunal dismissed Bansal’s challenge to the determination of his residential status and denial of DTAA relief, while partly allowing the appeal only to the extent of verification of the pending refund. Bansal retains the option to challenge the ITAT’s ruling before a higher judicial forum, including the jurisdictional High Court.

Cause Title: Binny Bansal Versus DCIT

Case No: IT(IT)A No.571/Bang/2023

Coram: Prashant Maharishi (Vice President) And Keshav Dubey (Judicial Member)