Varun Hemant Keskar, a non-resident working in Singapore, sold mutual fund units during the year and returned long-term capital gains of about Rs 17.15 lakh in his income-tax return filed on 26 June 2024. He paid tax on that figure in the normal way, treating the gains as taxable in India as the return form required. The return was processed, and on the face of it the matter should have ended there, since nothing in the return itself flagged any treaty claim for the assessing officer to examine.
The complication surfaced only after Keskar filed his return. He learned of a decision of the Mumbai bench of the Tribunal, in the case of Anushka Sanjay Shah, holding that capital gains earned by a non-resident from redeeming mutual fund units are not taxable in India at all under the India-Singapore Double Taxation Avoidance Agreement. That ruling treats mutual fund units as distinct from shares for treaty purposes, so that Article 13(4), which deals with gains from shares in companies, does not apply to them. Gains from mutual funds instead fall under the residual Article 13(5), which gives the right to tax such gains to the country of the seller's residence, in this case Singapore, and not to India.
Armed with that precedent, Keskar asked the first appellate authority, the Commissioner of Income Tax (Appeals), to apply the same treaty reading to his case and grant him relief on the Rs 17.15 lakh of gains he had already returned and paid tax on. The first appellate authority turned him down, but not on the merits of whether the treaty actually exempted the gains. It refused relief on the technical ground that Keskar had not claimed the DTAA exemption in his original return, and that a claim not made in the return could not be entertained for the first time in appeal.
The Pune Bench of the Tribunal did not accept that reasoning. It held that a taxpayer is not permanently shut out from a legitimate treaty claim merely because the claim was not made in the original return, particularly where the claim rests on a point of law clarified by a later coordinate bench decision that the taxpayer could not have anticipated when filing. An appellate authority examining a return is not confined to the four corners of what was originally claimed if a genuine legal entitlement comes to light during the appeal, and the Tribunal treated the Anushka Sanjay Shah ruling as exactly that kind of development.
Rather than deciding the treaty question itself in Keskar's favour outright, the Tribunal set aside the first appellate authority's order and sent the matter back for a fresh computation. It directed Keskar to place the relevant documents, including his tax residency position in Singapore, before the assessing officer, who is to examine the claim in light of the coordinate bench's reasoning in Anushka Sanjay Shah and recompute the tax liability accordingly, granting a refund if the claim holds up on verification. The result leaves Keskar's path to a refund of roughly Rs 1.70 lakh open, but conditional on that verification rather than settled outright by the Tribunal's order.
The order is a reminder to NRIs who file Indian returns on amounts they later discover were never taxable here under a treaty that the omission is not always fatal. A claim resting on a tax residency certificate and a treaty provision can still be raised at the appellate stage, and an appellate authority cannot dismiss it purely for want of a box ticked in the original return, so long as the underlying facts of non-residence and the nature of the asset are not in dispute. The decision also adds to a growing line of coordinate bench rulings treating mutual fund redemption gains differently from share sale gains under India's tax treaties, a distinction that NRI investors in Indian mutual funds will want their tax advisers to track before the next filing season.