DCIT Vs M. Mahadevan (ITAT Chennai)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Chennai, allowed three appeals against Shri M. Mahadevan, the assessee for AY 2013-14, 2014-15, and 2019-20. The appeals centred on two primary issues, determination of assessee’s residential status under Section 6 of the Income Tax Act, 1961, and the validity of an addition of Rs. 2,94,33,160 as long-term capital gains for AY 2019-20. The ITAT partly allowed the Revenue’s appeals, overturning the Commissioner of Income Tax (Appeals)’s decision on the residential status while remanding the capital gains issue for fresh adjudication.
Background
The assessee operates a network of restaurants and bakeries under brands like Hot Breads and in partnership with others across India and countries including the UAE, USA, Singapore, Malaysia, and Canada. A search and seizure operation under Section 132 the Act, revealed that assessee had consistently declared himself a Non-Resident Indian in his Indian tax returns, reporting only income earned in India and excluding global income. The AO, following assessments under Sections 153A (for AYs 2013-14 to 2018-19) and 143(3) (for AY 2019-20), determined assessee’s residential status as ‘Resident’ under Section 6 of the Act. Additionally, for AY 2019-20, the AO added Rs. 2,94,33,160 as long-term capital gains, alleging a colourable device to avoid tax through share and property transactions.
