IN an earlier episode of this column, we had the occasion to examine tax planning relating to corporate residence and how the Supreme Court's decision in the Tiger Global case -2026-TII-01-SC-INTL put paid to the efforts of paper entities created for the purpose of claiming tax residency in Mauritius to benefit from the capital gains exemption given under the relevant tax treaty. However, tax planning is not the preserve of only corporate taxpayers and a month earlier (9th January 2026), a Bench of the ITAT dealt another blow to some nifty tax planning efforts of one of the founders of Flipkart. The department was represented by Additional Solicitor General and the arguments are interesting on both the sides. it is worthwhile to examine the case as in some detail.

The essential facts of the case are as follows:

Subsequent to the takeover of Flipkart by Walmart, Mr Binny Bansal - 2026-TII-11-ITAT-BANG-INTL, one of the promoters of Flipkart had to resign as CEO and MD of Flipkart. As part of the same process, he also had to liquidate his holdings in Flipkart Singapore resulting in a hefty capital gain. Although Flipkart was registered in Singapore, the operating companies were all in India and Mr Bansal was a resident of India even though he was visiting Singapore off and on. If Mr Bansal continued to be resident of India, he would be subject to capital gains tax in India that, even if taxed at a concessional rate, would amount to a substantial tax outgo.

If on the other hand he becomes a resident of Singapore based on the number of days stay in India, in terms of Article 13(5) of the India-Singapore tax treaty, the capital gains arising to a tax resident of Singapore, would not be chargeable to tax in India. Therefore, the tax planning effort will be to ensure that Mr Bansal is not a resident of India. This in essence is the gist of this case.

Therefore, it will be instructive to first note the provisions of the ITA for determining residence in India at the relevant point of time.

Section 6

For the purposes of this Act, -

(1) An individual is said to be resident in India in any previous year, if he-

(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or

(b) […]

(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

[Explanation 1.]-In the case of an individual, -

(a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted ;

(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted.

Thus, one becomes a resident if he/she stays in India for 182 days or more. Else, he/she would be a non-resident. But this is too easy a rule to be manipulated. Therefore, a further test of presence of 365 days in 4 preceding years and presence of 60 days in the current year.

The relevant AY in this case was AY 2020-21 corresponding to the FY 2019-20. So, one has to see if Mr Bansal's stay in India in FY 2019-20 exceeded 182 days or not. From the order of the Tribunal, it is clear that his stay in India for this year was 141 days. (Paragraph 70 of the order). Therefore, he would normally be non-resident for that year. But then, one has also to see his stay in India for the last 4 Financial Years.

The calculation of the days in the case of Mr Bansal is given in the finding portion of the Tribunal's order as follows: (Paragraph 72)

Thus, even if he was in India for less than 182 days, his total stay in the preceding 4 financial years being more than 365 days, he would be ordinarily resident in India. It is here that the explanation given concessions in two situations come into play. Mr Bansal's stay in India in the relevant year was 141 days which is more than 60 days. But, if the explanations apply, then his stay being less than 182 days, he would be treated as a non-resident for that year.

The first argument of the taxpayer was that for the relevant FY, he qualified as a person "being outside India, comes on a visit to India", and thus, should be classified as a Non-Resident according to Explanation 1(b) to section 6(1)(c) of the Act, as his presence in India during the relevant previous year was for less than 182 days.

This is indeed a novel argument. The AO however took the view that in order to avail of this provision, the taxpayer had to be non-resident in the previous year and the explanation is meant to preserve his status of a non-resident. The taxpayer argued that if a taxpayer is already a non-resident, then his residence status determination under the explanation becomes meaningless. Reference was also made to the official Hindi translation of the Act that uses the term 'Jo Bharat ke bahar rahte hue'- whereas the term used for non-resident is 'Anibasi'.

One may note the submission of the ASG who represented the Revenue in this regard. According to him, the expression 'being outside India' cannot be extended to cover a person who was resident in India up to the immediately preceding year, and who merely undertakes a short departure before the commencement of the financial year, only to return frequently and continue to maintain substantial presence in India in the relevant financial year and that to interpret otherwise would defeat the legislative intent and permit residents to wrongfully claim the relaxation meant exclusively for non-residents.

The fallback argument of the taxpayer was that he, a citizen of India, left India for the purposes of employment outside India and hence he satisfies the conditions of Explanation-1. The relevant dates as given by the taxpayer were as follows: (Pp 25-26 of the ITAT Order)

The case made out by the taxpayer was that at the time of his resignation from 'Xto10X' Singapore and prior to taking employment with 'Three State Singapore', an accredited Institutional Fund Management Company by the Monetary Authority of Singapore, the taxpayer was present in India. Therefore, he left India for the purpose of employment with 'Three State Singapore' in the FY 2019-20 during which year he has stayed in India for a period of less than 182 days.

On the other hand, Revenue's argument was that to benefit from Explanation 1(a), three conditions must be cumulatively satisfied-

- the taxpayer must be a citizen of India,

- he must leave India during the relevant previous year and

- he must leave either for the purposes of employment or as a crew of an Indian ship.

It was argued that the taxpayer has repeatedly contended that he had left India in February 2019 which was not in the relevant previous year and hence he was not entitled to the benefit and the taxpayer cannot selectively change his stance.

The Revenue also referred to certain other vital documents and dates and that make interesting reading.

Apparently, an Executive Agreement was executed between 'Three State Capital Advisors' and Mr Bansal on 20th August 2019, which was before 05.09.2019, the date on which he is supposed to have resigned from 'Xto10X'. Besides, the application for employment pass in Singapore was submitted on 21st August, 2019 well before his resignation from 'Xto10X'. Besides, it was pointed out that even if the executive agreement was signed on 20th August, 2019, the same ought to have been with 'BTB Advisors Pte Ltd' which later became 'Three State Capital Advisors Pte Ltd' since the name change became effective only from 02/09/2019.

Revenue also pointed out certain further discrepancies regarding the claim that the taxpayer had submitted his resignation from 'X to10X Technologies Pte Ltd' while being in India. The resignation letter was apparently signed by both the taxpayer and the Director of the company, Saikiran Krishnamurthy. Revenue doubted as to how the letter could be signed by both, one from Singapore and another in India especially when the taxpayer had not submitted any supporting details such as e-mail exchange or courier receipt. Besides, as per employment contract, a formal notice period of three months was required to be served by either party whereas the resignation by the taxpayer was accepted on the same day. According to the Revenue, all these inconsistencies indicate that the taxpayer was not able to substantiate his claim of leaving India for the purpose of employment in the financial year.

In fact, the ASG in his written submission invoked the substance over form doctrine and argued that the taxpayer has engaged into a colourable device to circumvent the residency provision of section 6(1)(c)- the form adopted was that of foreign employment with entities promoted, controlled, and substantially owned by the taxpayer himself.

To wit, on November 13, 2018, the taxpayer resigned from Flipkart Internet Pvt Ltd, India; on December 3, 2018, the taxpayer incorporated 'Xto10X Technologies Pvt Ltd', an Indian company; on January 14, the taxpayer incorporated Xto10X Technologies Pte. Ltd, Singapore and this company held 100% shares of the Indian company. On February 17, 2019, the taxpayer executed an employment agreement with the Singapore company and on February 21, 2019, he claimed to have travelled to Singapore to take up this alleged employment. It was argued that both the Indian and Singapore companies were promoted and substantially controlled by the taxpayer and were part of his continuing entrepreneurial ventures and consequently the alleged foreign employment was self-created arrangement and could not be recognized for the purposes of Explanation 1(b). Discrepancies were also pointed out in the switch to Three State Capital Advisors Pte Ltd and It was argued that the taxpayer orchestrated a scheme to portray his presence abroad as employment and his presence in India as 'visits' with the sole purpose of avoiding Indian taxation of capital gains. Arguments were also advanced to contend that this comes within the provisions of GAAR.

Although the Tribunal in its judgement did not consider these arguments, but these do indicate the manner of planning for the purpose of taking advantage of the days of presence criterion. The Tribunal however referred to the subsequent changes in the residency rule to counter instances who actually carry out substantial economic activities from India manage their period of stay in India to remain a non-resident in perpetuity and not be required to declare their global income in India. That and following decisions in Principal Commissioner of Income Tax v Binod Kumar Singh (Bombay HC 2019) and Additional Director of Income Tax v Sudhir Choudhrie (ITAT, 2017 Delhi) = 2017-TII-52-ITAT-DEL-INTL, the Tribunal also held that the phrase 'being outside India' applied to non-residents who come to India when the extension of time can be allowed.

As for the application of Explanation relating to Indian citizens leaving India for the purpose of employment, the Tribunal referred to the following submission of the taxpayer:

"7.8 The assessee spouse and children also moved to Singapore in March 2019. The assessee submits that he continues to reside in Singapore with his family till date. The assessee's children attend school in Singapore. The assessee spouse has been in employment in Singapore. The assessee and his spouse of applied for and granted permanent resident status in Singapore.

7.9 The assessee submits that he has been residing in Singapore since February 2019 till date. He only comes on brief visits to India for business and personal purposes."

The tribunal therefore concluded that the taxpayer was not a person who was leaving India for employment, rather he was residing in Singapore but used to come on brief visit to India adding that If the stand of the taxpayer was accepted that for this assessment year [AY 2020-21] also he should get a benefit of extended time period of 182 days instead of 60 days as per the second limb of section 6 (1) (c) of the Act, then every person who visits India will get such an extension of period every year. The provision applies only to the person who are leaving India and not visiting India.

Residency under DTAA Tie-breaker tests

The taxpayer claimed residency of Singapore and produced a certificate of residence from Inland Revenue Authority of Singapore. The taxpayer claimed that under the tax treaty between India-Singapore also he should be considered as a resident of Singapore applying the tie-breaker rule in Article 4 of the tax treaty.

According to the provisions of Article 4 (2) where the individual is a resident of both the States i.e. India and Singapore, then, his title shall be determined as follows: -

(a) he shall be deemed to be a resident of the state in which he has a permanent home available to him, if he has a permanent home available to him in both states, he shall be deemed to be a resident of the state with which his personal and economic relations are closer (centre of vital interest),

(b) if the state in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either state, he shall be deemed to be a resident of the state in which he has an habitual abode

(c) if he has an habitual abode in both states or in neither of them, he shall be deemed to be a resident of the state of which he is a national

d) if he is a national of both states or of neither of them, the competent authorities of the contracting State shall settle the question by mutual agreement.

Permanent home

While the taxpayer asserted that he was resident of Singapore under each criterion, the stand of the Revenue was exactly the opposite. Briefly, as regards, the permanent home, the taxpayer claimed that once the taxpayer moved to Singapore, he was staying in a serviced apartment and subsequently in a rented accommodation and although he has a home available in India, the same was not habitable and it cannot be said that he had a permanent home available in India.

As against this, the tax department asserted that as per income tax records, the taxpayer had permanent home in India and was living in an apartment at Bangalore. Besides, he had purchased a large residential house in Koramangala, Bangalore and had also claimed deduction under section 54F house which is available only in case of purchase or construction of a residential house. Therefore, the claim that the claim that the house was not habitable could not be accepted. Besides, during the most difficult time of COVID pandemic, he stayed in India for 38 days. Accordingly, he had a permanent home in India only.

In its final finding the ITAT held that the taxpayer had a permanent home available in both the States and distinction cannot be made with respect to more permanence- such as own house property in India compared to a rented premises.

Centre of vital interest

The taxpayer claimed that his centre of vital interest was also in Singapore- his family was staying with him, his wife was serving at Singapore, his children were studying at Singapore, he was staying there as an employee of a company in Singapore and therefore his centre of vital interest was in Singapore compared to India.

The AO had also examined the aspect of centre of vital interest of the taxpayer by examining the summary of assets and liabilities for the respective years from his return of income and found that the majority of his economic interest was in India. Even the underlying assets of the shares of Flipkart Singapore that were transferred giving rise to capital gains were also of Flipkart India ltd. The website of the company also demonstrated that all the assets and operations of the company was in India and hence his economic interests were also in India. As for habitual abode and nationality, these were also in India.

The Tribunal in its order has recorded that it had asked the taxpayer to furnish details of investments in India and investments in Singapore while the taxpayer submitted the details of investments in India and investments outside India and noted that the taxpayer had constantly provided data of different nature.

The claim of the taxpayer was that the centre of vital interest must be seen after the taxpayer migrated outside India and the claim of the revenue was that it should not be seen at that point of time but throughout the year.

In that context, the ITAT observed that since the test is to examine the residential status of the taxpayer for the assessment year, it is material that such centre of vital interest remains throughout the assessment year and not at the end of the assessment year only. This is also for the reason that all the test envisaged under Article 4 (2) refers to for the situation of the whole year.

The ITAT observed that if a person who has a home in one state sets up a second in the other state while retaining the first, the fact that he retains the first in the very environment he has always lived, where he has always worked and where he has his family and possessions, can, together with other elements go to demonstrate that he has retained his centre of vital interest in the first state.

The Tribunal found that most of the investments outside India was made only after he shifted to Singapore. Still his major investment, his house properties are situated in India. His family has also migrated with him over a period of time. The wide variety of investments that he has made while in India such as alternative investment funds, unlisted companies equity shares, listed equity shares and mutual funds do not exist in Singapore. In Singapore he made investment in shares of unlisted companies and further held substantial assets through family trust where he and his wife are the major beneficiaries. Further his major capital commitments of investments are also in India; he also provided loans to the tune of Rs. 30 crores to various entities in India and did not own any immovable property outside India.

On this issue the ITAT finally held - "it is apparent that assessee has retained his houses in India where he has decided throughout his life, where he is carried out his business and in assessee's own words he is one of the most successful entrepreneurs through start-ups. It is to be appreciated that assessee moved with his family and his family also shifted to Singapore. But even his family does not have any home in Singapore, therefore, looking at his major economic interest, it is apparent that it is closer in India than Singapore or anywhere else."

Habitual Abode

Having already determined that tie breaker at the earlier step, it is not understood why the ITAT again went to determine the issue of habitual abode. The ITAT held- "With respect to the habitual abode, it is apparent that he stayed in India for 141 days in India and balance days in other countries. This is the first year that assessee went out of India for employment purposes. But he kept on visiting India for almost 141 days. Thus, for most part of his life, he was in India, he is having house in India. Thus the assessee worked only for the part of the year in Singapore and also lived in India for part of the year. Thus, In that case, the assessee will have an habitual abode in both India and Singapore."

Nevertheless, the Tribunal in the end recorded that "according to the Tiebreaker test also the assessee is a resident of India."