Despite relocation and overseas employment, ITAT denies ‘Non-Resident’ status and treaty benefits
In a landmark ruling with far-reaching implications for high-net-worth individuals and globally mobile Indian entrepreneurs, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that Mr. Binny Bansal, co-founder of Flipkart, did not qualify to be a non-resident of India under the Income-tax Act, 1961 (“the Act”) and further denied treaty relief under the India-Singapore Double Taxation Avoidance Agreement (DTAA).
Background and Facts
Mr. Binny Bansal (Mr. Bansal or assesse), an Indian citizen and co‑founder of Flipkart, had historically been a resident of India. Following the acquisition of Flipkart by Walmart in 2018, Mr. Bansal resigned from his executive roles in India and subsequently took up employment in Singapore with effect from February 2019, i.e. FY 2018-19.
In Financial Year (FY) 2019-20, Mr. Bansal sold shares of Flipkart Private Limited (Singapore). He claimed non-resident status under the Act for the said year and contended that gains on such sale were exempt under Article 13(5) of the India-Singapore DTAA.
The Assessing Officer (AO) disputed the residential status of Mr. Bansal. According to the AO: –
- Assesse had stayed in India for 141 days during FY 2019-20.
- He had been present in India for more than 365 days during the preceding four years; and
- He continued to maintain significant personal and economic ties with India.
The AO treated Mr. Bansal as a resident and an ordinarily resident, denied treaty relief, and brought the capital gains to tax in India. The Dispute Resolution Panel (DRP) upheld the AO’s view, prompting an appeal to the ITAT.
Issues Before the Tribunal
- Whether Mr. Bansal qualified as a non-resident under the Act for FY 2019-20;
- Whether Mr. Bansal could be regarded as a resident of Singapore under Article 4 of the India-Singapore DTAA; and
- If dual residency existed, whether the treaty tie-breaker rules tilted residency to Singapore.