A Singapore-based non-resident Indian (NRI) paid tax on long-term capital gains (LTCG) of ₹17,15,446 from mutual funds but later discovered a rule exempting such gains under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The Income Tax Appellate Tribunal (ITAT) ruled in favor of the NRI, allowing him to claim the exemption despite initially paying tax. This decision is important for NRIs who pay tax in India and later find treaty benefits or favorable rulings.
- The NRI declared LTCG income and paid tax in his 2024-25 return.
- He later learned about an ITAT ruling exempting such gains under the India-Singapore DTAA.
- The CIT(A) initially rejected his appeal on jurisdictional grounds.
- The ITAT overturned the CIT(A) decision, allowing the appeal and directing reassessment.
- The case confirms appellate authorities can consider new claims not made in the original return.
Who is the taxpayer involved in this case?
Varun Hemant Keskar, an individual NRI working in Singapore, held a tax residency certificate from Singapore for the financial year 2023-24. He filed his income tax return in India on June 26, 2024, declaring total income of ₹17,73,990, which included LTCG of ₹17,15,446 from selling mutual fund units.
What was the initial tax treatment of the capital gains?
The Central Processing Centre (CPC) processed Keskar's return on September 6, 2024, accepting the declared income without adjustments. The LTCG was taxed, resulting in a tax liability of ₹1,70,372, which was adjusted against his tax deducted at source (TDS) credit.
Why did Keskar appeal the tax treatment?
After filing his return, Keskar learned about a Mumbai ITAT ruling in the case of Mrs. Anushka Sanjay Shah, which held that LTCG from mutual funds are exempt under Article 13(5) of the India-Singapore DTAA. He appealed to claim the same exemption.
What was the CIT(A)'s decision on the appeal?
The Commissioner of Income Tax (Appeals) dismissed Keskar's appeal, stating it was not maintainable. The CIT(A) ruled that since there was no adjustment made by the CPC under section 143(1), the appeal against the intimation was invalid. The CIT(A) suggested Keskar should have filed a revised return or sought condonation of delay instead.
How did the ITAT respond to the CIT(A)'s ruling?
The ITAT disagreed with the CIT(A) and allowed Keskar's appeal. It noted that Keskar had declared the gains as taxable but later sought exemption based on a coordinate bench decision. The ITAT cited Bombay High Court and Supreme Court judgments supporting the acceptance of new claims before appellate authorities, even if not made in the original return.
What directions did the ITAT give?
The ITAT set aside the CIT(A)'s order and directed Keskar to submit a revised computation of his capital gains to the assessing officer. The officer must re-compute the tax liability considering the exemption under the India-Singapore DTAA and grant any refund due after verifying documents. Keskar must cooperate by responding to notices and providing evidence promptly.
What are the key takeaways for non-resident taxpayers?
- Non-resident Indians can claim treaty benefits even after filing returns and paying tax.
- Appellate authorities have the power to consider new claims not made in the original return.
- Taxpayers should provide revised computations and evidence to the assessing officer for reassessment.
- Procedural steps are necessary before substantive treaty benefits are granted.
Frequently Asked Questions
Q: Can NRIs claim tax treaty benefits after filing their returns?
A: Yes, the ITAT ruling confirms that NRIs can claim treaty benefits even after filing returns and paying tax, by appealing and submitting revised computations.
Q: What is the India-Singapore DTAA Article relevant to LTCG?
A: Article 13(5) of the India-Singapore DTAA exempts certain long-term capital gains from taxation in India for residents of Singapore.
Q: What should a taxpayer do if they miss claiming a treaty benefit initially?
A: They should file an appeal with the appellate authorities and provide revised computations and supporting documents to seek relief.
Q: Does the ITAT ruling mean immediate refund?
A: No, the ITAT directs reassessment by the tax officer, who will verify documents and then grant refunds if applicable.
