Flipkart co-founder Binny Bansal denied tax exemption on share sale
What's the story
The Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) has rejected an appeal by Flipkart co-founder Binny Bansal, denying him a tax exemption on profits from selling his shares. The tribunal ruled that since Bansal spent over 60 days in India during the fiscal year 2019-20, he didn't qualify as a non-resident.
Tax treaty
Bansal's argument and tribunal's response
Bansal argued that his gains should be tax-free under the India-Singapore treaty. However, the tribunal clarified that exemptions only apply if one is officially a non-resident for the whole year before. They also warned against accepting his claim as it could set a bad precedent. While some minor points were in his favor, most of Bansal's appeal was rejected.
Tribunal's ruling
ITAT's final order and Bansal's association with Flipkart
The tribunal passed its final order on January 9, in a 189-page document. It said, "We hold that the assessee (Bansal) has been in India for more than 60 days and satisfied the residential test of provisions under section 6(1)(c) of the (Income Tax) Act and is not entitled to the relaxation in the period of stay."
Tax department
Tax department's contention and tribunal's response
The tax department argued that the relaxations under the IT Act being claimed by Bansal can only apply to a person who is already a non-resident, not an assessee who was a resident in the immediately preceding year. The tribunal agreed with this view, saying if Bansal's stand was accepted, every person visiting India would get such an extension of period every year.
Future implications
Bansal's departure from Flipkart and future implications
Bansal resigned from the board of Flipkart, ending his association with the e-commerce firm he co-founded with Sachin Bansal in 2007. This case highlights the strictness of residency rules when it comes to taxes. It remains to be seen how this ruling will affect other similar cases in the future.