January 09, 2026 : The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that merely relocating family members abroad or making fresh overseas investments does not, by itself, displace an individual’s “centre of vital interests” from India when personal and economic relations continue to remain substantially closer to India.
The ruling came in the case of Binny Bansal v. Deputy Commissioner of Income Tax, International Taxation Circle 1(1), Bangalore, where the Tribunal upheld the Revenue’s view that the assessee was a resident of India for Assessment Year 2020–21, both under the Income Tax Act, 1961 and under the India–Singapore Double Taxation Avoidance Agreement (DTAA).
The Tribunal noted that the assessee had stayed in India for 141 days during the relevant previous year and for more than 365 days in the four preceding years. This satisfied the conditions under Section 6(1)(c) of the Act, making him a resident of India.
Rejecting the claim for benefit under Explanation 1(b) to Section 6(1)(c), the Bench held that the phrase “being outside India” is intended to apply to individuals who are already non-residents, and not to those who were residents in earlier years. It also denied relief under Explanation 1(a), clarifying that the relaxation applies only to the specific year in which an individual leaves India for employment abroad, and not to subsequent years.
Having concluded that the assessee was a resident under domestic law, the Tribunal proceeded to apply the tie-breaker test under Article 4(2) of the India–Singapore DTAA. The Division Bench, comprising the Vice President and the Judicial Member, reiterated that the test must be applied sequentially.
On the question of a permanent home, the Tribunal found that the assessee had a permanent home available in both India, through owned properties, and in Singapore, where he resided in rented accommodation.
While examining the “centre of vital interests”, the Tribunal stressed that personal and economic relations must be considered together. It observed that although personal factors such as relocation of family members are relevant, economic relations carry significant weight.
Importantly, the Tribunal clarified that for determining economic relations, greater importance must be given to active involvement in business and commercial activities rather than to passive investments. Investments in shares, mutual funds, or bank accounts, it noted, do not necessarily shift with residence, as they are often driven by expected returns rather than physical presence.
Since the assessee’s active economic and business interests continued to be substantially linked to India, the Tribunal held that his centre of vital interests had not shifted out of India.
On the criterion of habitual abode, the Tribunal observed that the assessee had spent 141 days in India during the year and the remaining time across other countries, including Singapore. Given that this was the first year of overseas employment, coupled with frequent visits to India and long-standing residence here, the Tribunal concluded that the assessee had a habitual abode in both countries.
This necessitated consideration of nationality. As the assessee was an Indian national, this factor also weighed in favour of India under the DTAA tie-breaker rules.
Addressing the procedural challenge under Section 144C, the Tribunal held that the words “in the first instance” require the Assessing Officer to decide the procedure based on the status declared in the return of income. Since the assessee had claimed non-resident status in the return, he qualified as an eligible assessee at that stage, obligating the Assessing Officer to issue a draft assessment order.
The Tribunal noted that this procedure safeguards appellate rights in case a higher forum later takes a different view on residential status. Accordingly, it held that there was no procedural infirmity and that the final assessment order was not barred by limitation.
In the result, the ITAT upheld the findings of the Assessing Officer and the Dispute Resolution Panel, holding that the assessee was a resident of India for the relevant assessment year under both the Income Tax Act and the India–Singapore DTAA.
Case details:
Shri Binny Bansal v. Deputy Commissioner of Income Tax, International Taxation Circle 1(1), Bangalore
IT(IT)A No. 571/Bang/2023
Coram: Keshav Dubey (Judicial Member) and Prashant Maharishi (Vice President)
