Strategic Overseas Ties and Corporate Structuring Fail to Shield Global Income: ITAT Declares assessee a Resident
Mahadevan (ITA Nos. 1824, 1825 & 1826/Chny/2024
Facts:
1. The AO treated M. Mahadevan as a Resident under Section 6(1)(a) & (c) of the Income Tax Act based on:
FRRO data showing stay in India exceeding thresholds (e.g., 183 days for AY 2013–14 & 2014–15).
Passport stamps indicating “social” purpose of travel abroad (Malaysia, Singapore).
Control and management of business shown as being in Chennai.
TRC from UAE (issued in 2021) was not accepted for earlier years.
2. AO questioned:
Sale of OCPL shares at ₹100/share in August 2018 vs prior valuation of ₹19,556/share in June 2018.
Slump sale of Fine Dine division of OCPL (including land at Cathedral Road) to CCMPL (another group entity), then sale of that land to assessee’s wife at undervalue.
Claimed this was a colorable device to avoid tax.
ITAT Chennai held as under:
1. FRRO data is more reliable than passport alone because it tracks entries/exits accurately. Assessee failed to produce any evidence of employment or business outside India. Visa entries were social/tourist, not business-related.
2. Business control and management was effectively in India. TRC obtained in 2021 irrelevant for prior years; no benefit under Article 4 of the India–UAE DTAA.
3. So, the assessee is Resident under Section 6(1)(a)/(c). Global income, including foreign bank interest and business income, is taxable in India.
4. The entire transaction was pre-meditated and colorable: Sequence of events, valuations, and email correspondence showed it was not an arm’s length deal. Assessee tried to show slump sale and share sale as independent, but it was a coordinated device.
The copy of the order is as under:
