Case
The case of Binny Bansal v. ITAT Bangalore of January 2026. DCIT has major faults when compared with the binding precedent by the Karnataka High Court in the case of Director of Income Tax v. Manoj Kumar Reddy Nare.
The fundamental position held by the Tribunal that Explanation 1(b) to Section 6(1)(c) only applies to non-residents the tax authority interprets the statutory text as well as the ratio of the Karnataka HC.
This discussion shows that the judgment is confused by the descriptions of beneficiaries in the CBDT circulars of the beneficiaries with the statutory requirements of being a resident, and introduces new words to the statute that Parliament did not intend to make.
Finance Act 2025 does not include any changes to Section 6, which implies that the legal framework of AY 2020-21 is the one that existed before this year.
The Binny Bansal decision, on appeal, would establish a durable categorization of Indian citizens on historical residential ground instead of present status [a] result that is incompatible with the dynamism and annual changes of the residential status process.
The Binny Bansal v case of the recent ITA ruling by the Bangalore branch of the ITAT. The controversial understanding of the meaning of Section 6(1) of the Income Tax Act has created ripples in the tax community because of the interpretation of the meaning of Section 6(1) by the DCIT.
In particular, it seems that the decision of the Tribunal to rely on Explanation 1(b) to Section 6 to make a departure from the binding precedent of the Karnataka High Court is faulty.
Although settled law indicates that the 182-day limit is imposed on any Indian citizen employed outside the country who happens to be visiting India, this decision is aimed at restricting such an advantage to those individuals who had been non-residents in previous years.
The Tribunal in the Manoj Kumar Reddy case has added restrictive conditions that have never been enacted by Parliament, as it has applied the principles in a misleading manner.
As an Indian citizen or founder of a startup who is moving to the country to work, this decision puts an unstable situation in which the residential status will no longer be viewed using the literal wording of the statute.
Unless this ruling is somehow overturned during an appeal review by ITAT Bangalore, it will be liable to gravitate towards the erosion of tax certainty that was previously upheld by the Karnataka High Court.
The Karnataka HC precedent is in favour of Bansal
The logic error in the line of reasoning of the ITAT Bangalore becomes clear when one looks at the realities of Manoj Kumar Reddy. The assessee in the case did not qualify as an established non-resident prior to the disputed year- he was a resident of India with a stay of 365 days a year between the years 2000-01 up to 2002-03, he had stayed 306 days in the year 2003-04.
On deputation to IBM Chicago on February 1, 2004, he left India, and his residential status on AY 2005-06 was challenged.
In [2011] 12 taxmann.com 326, the Karnataka High Court maintained the decision made by the ITAT that Manoj Kumar Reddy was entitled to the benefits in Explanation 1(b). The HC believed that his stay between August 18 and September 6, 2004, was a visit to India during deputation, and the days should not be counted in the 60-day calculation.
HC did not grant aan ppeal on the part of Revenue because it did not raise a substantial question of law.
Most importantly….
The Karnataka HC did not limit Explanation 1(b) to mean only non-residents. The ratio was concerned with the difference between temporary visits and permanent returns:
- When a mere visitor comes to India and leaves the country, then there is a person “being outside India” 1(b) is applicable.
- In the case a person arrives on a visit and permanently moves back to India of the same year, then 1(b) cannot apply.
The restriction of the Karnataka HC was associated with permanent return in the same financial year, and not with prior-year residential status. As Manoj Kumar Reddy was a former resident himself and asserts Explanation 1(b) benefits, the HC implicitly took that the clause does not apply to persons who were already non-residents.
Speaking of the ITAT misusing precedents
The Binny Bansal case was handled by the ITAT Bangalore, which had a number of demonstrable mistakes in the way it handled the Karnataka HC precedent:
- To begin with, the Tribunal referred to the ITAT Bangalore decision of Manoj Kumar Reddy [2009] 34 SOT 180 in paragraph 21, that the issue is, in fact, in favour of revenue.
- This is deceptive: the Karnataka HC overturned the appeal by the Revenue on that same order of the ITAT, i.e., the last . The binding precedence was in favour of the assessee. In the case of the Tribunal, the decision of the lower tribunal was mixed up with the decision of the higher court to enhance the favour.
Second,
The ITAT differentiated the factual basis of the precedent in the Karnataka HC, even though it left out the factual distinction: Binny Bansal and Manoj Kumar Reddy were all residents of India in the previous years who had gone to foreign countries to work.
Enforcement of Explanation 1(b) would have implied that prior non-resident status was a prerequisite, which it certainly was not, to which Manoj Kumar Reddy could not have claimed; nevertheless, the Karnataka HC did.
Third,
The Tribunal was based on the observation of the Delhi ITAT in ADIT v. Sudhir Choudhrie [2017] 88 taxmann.com 570 that equated being outside India with being non-resident.
But there was a material difference in context between the reference in that case and the determination of residential status per se. To be more important, a decision of the Delhi ITAT cannot be used in place of a ruling of the Bangalore Bench, which is binding on the Karnataka HC.
There is no statutory language that presupposes previous non-resident status.
And Section 6(1)(c) 1(b) explains:
(b) being a citizen of India, or a person of Indian origin… who, out of India, comes to visit India in any preceding year, the said provisions of sub-clause (c) shall apply… as the words sixty days… were replaced by the words one hundred and eighty two days…
The phrase of not being in India is a present participle that speaks of what happened to the person at the time of visiting. It defines the status of residence, as opposed to physical residence. The clause does not state that one is not a resident or that he or she possesses non-resident status, language carefully employed by the legislature elsewhere in Section 6 when it desires to refer to residential classification.
Reflect on the drafting of legislative options:
- Provision Language Used Meaning
Section 6(1)(c) Explanation 1(b) being outside India Physical location 6(6) non-resident (used 4 times) Residential status 115C(e) non-resident Residential status. - There is the maxim expressio unius est exclusio alterius in force; where Parliament intends to refer to the status of residence, it says non-resident, where it uses other words (being outside India), it means something different.
The ITAT succeeded in modifying the statute to include missing words to understand it as:
who, as a non-resident, outside India, comes on a visit.
- This flouts the cardinal rule whereby courts are not allowed to suggest words which Parliament did not intend to create.
As the Supreme Court held in Padmasundara Rao v. State of Tamil Nadu [2002] 3 SCC 533:
The court cannot reform, recast or rephrase the act.
What is missing in the provision cannot be implied by the court.
CBDT circulars spell out the beneficiaries, rather than eligibility
The CBDT Circular 554 (1990) 684 (1994), which provides that the amendments allow non-resident Indians to reside in India without being treated as a resident were heavily relied upon by the ITAT, which adds that the amendments permit that non resident Indians are able to remain in India without being treated as a resident.
The Tribunal construed this as limiting the eligibility to the current non-residents.
This argument has a logical fallacy.
The circulars explain the practical impact of the provision, assisting NRIs to become residents inadvertently when they spend a long time in the country. It is not the same thing to describe who benefits from a provision and to prescribe who is eligible.
A similar argument would be ridiculous:
• “This highway exit assists people leaving the building” ≠ only people who are already outside of the building can use this exit.
• Diplomacy. This medicine is beneficial to diabetic patients” ≠ only diabetics can take this medicine.
The circulars do not specify the requirement (pre-existing non-resident status), but the purpose (facilitating NRI visits). Section 6 could have been changed in Parliament and read: being a non- resident who comes on a visit–it was not changed.
Besides, the CBDT circulars are authoritative to revenue authorities but not statutory under Section 119 of the Income Tax Act, and in Navnit Lal v. K.K. Sen [1965] 56 ITR 198 of the Supreme Court.
Assume the statutory text provides that one is outside India,
a circular cannot be effective in rewriting that to state that oneself isa non-resident.
The Binny Bansal judgment has internal contradictions
The logic behind the reasoning of the ITAT causes an internal inconsistency between Explanation 1(a) and 1(b):
The first explanation (a) is used to explain a citizen of India who, in any past year, left India with the purpose of being employed outside India.
ITAT conceded that this was theoretically possible in the case of Bansal, in case he had left India in FY 2019-20 and not in FY 2018-19.
Explanation 1(b) is used inthe case of a citizen who, however, is outside India, pays a visit to India.
The two provisions are formulated in the same way as exemptions to the 60-day rule. Both provisions do not include the term non-resident and do not presuppose that he must be a non-resident beforehand.
However, the ITAT put in place a previous non-resident qualification to clause (b) but agreed that clause (a) might be applied to a resident who moves out of India.
This brings about inequality of treatment of the same wording provisions, which has no statutory basis. Insofar as both clauses are meant to enable the Indian citizens to work outside the country, it is illogical to insist that one of them must be a non-resident and the other a resident before the clauses become workable.
The absurd result problem
According to the interpretation of the ITAT, a person who:
• 50 years a resident in India.
• Moved to a foreign country with legitimate jobs.
• Acquired permanent home overseas.
• Visits to India on a temporary basis.
Should be permanently disqualified in respect of benefits under Explanation 1(b) since he was not already a non-resident when he moved. This establishes a permanent stratification on a historical basis, but not on the present condition.
Such an interpretation goes against the basic rule that the residential status is decided on a de novo basis every year. The reason why section 6 instills the annual tests is that circumstances may fluctuate in an individual.
Reading of the ITAT would give initial residential status a form of permanent disability, the effect of which Parliament certainly did not have in mind when it employed the words in the phrase in any previous year.
This analysis is not influenced by the Finance Act 2025
Section 6 in the Finance Act 2025 has no changes. Provisions on the residential status have not been updated since being last revised by the Finance Act 2020, which added:
Section 6(1A): Deemed resident clause of a stateless Indian citizen.
• Modified Explanation 1: 120-day threshold of visiting NRIs/PIOs whose income is more than 15 lakhs.
Importantly, the modifications introduced by the Finance Act 2020 become effective since AY 2021-22. In the current year (AY 2020-21) of Binny Bansal, the pre-amendment law applies – the 182-day pre-amendment rule of visiting Indian citizens/PIOs based on Explanation 1(b), without the income requirement.
The interpretation of the term being outside India in the explanation 1(b) is not subject to any validating or retrospective provisions in the Finance Act 2025.
The legal issue of whether or not the current statutory language of Explanation 1(b) must have the prerequisite of the prior non-resident status is still within the judicial interpretation of the statutory language itself.
Binding precedent and per incuriam analysis
The High Court of ITAT Bangalore is the Karnataka High Court. According to the doctrine existing in the M/s. of the Supreme Court.
East India Commercial Co. Ltd. v. Collector of Customs [1962] AIR 1962 SC 1893:
The law proclaimed by the Supreme Court is obligatory on powers or tribunals subject to its superintendence, and they must not disregard it in the case of making a proceeding, or in the decision of the rights, according to which a proceeding has been instituted.
The decision of the Karnataka HC in Manoj Kumar Reddy was to be obeyed by the ITAT Bangalore unless it could be established to be rightly different. The alleged difference that the Tribunal made, namely that Manoj Kumar Reddy was by now a non-resident, is factually inaccurate.
Manoj Kumar Reddy was an Indian resident who had been made non-resident by deputation, just as Binny Bansal had been made non-resident by Singapore employment.
A decision that is made without knowledge of a binding precedent is per incuriam. Although the ITAT referred to the decision of the Karnataka HC, it misinterpreted its ratio; the HC did not conclude that prior non-resident status is a prerequisite.
This mistake is compounded by the fact that the Tribunal has recourse to a decision made by a Delhi ITAT over an HC decision,n which is jurisdictional.
Best Arguments on either side
- In case Binny Bansal is in the wrong (position of the assessor):
The statutory text clearly refers to being outside India, and not to being non-resident. Karnataka HC, in the case of Manoj Kumar Redd,y permitted a former resident on deputation outside India to receive benefits under the Explanation 1(b).
Circulars of CBDT may not impose any initial requirements beyond statutory requirements. The interpretation establishes ridiculous fixed classifications that are not consistent with annual residential status determination. The ITAT confused the purpose (to the assistance of NRIs) with eligibility (only before NRIs).
- Assuming Binny Bansal is right (position of revenue):
The legislative history has always indicated that the explanation of 1(b) assists NRIs to retain their status. The fact that the meaning of the word visit is used by parliament comes on a visit to India means that the home of the concerned person is outside the country of residence.
The clause does not allow it to be abused by the residents who temporarily moved to another country to obtain non-resident status. The legislative intent that can be followed during interpretation is represented by CBDT circulars.
The burden of weight favors the position of the assessee.
The statutory wording is also explicit; the statutory HC precedent is open to wider interpretation, and interpretation of the statute by the ITAT needs the incorporation of words.
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Material legal issues that need to be reviewed by the appellate court
The decision of the Indian Taxation Authority in Bangalore in Binny Bansal v. The identified errors in DCIT are the following:
- Loss of Karnataka HC precedent: The Tribunal misinterpreted the decision in Manoj Kumar Reddy, which said that in Explanation 1(b), prior non-resident status was needed, in the case where the assessee himself was a previous resident.
- In addition, which has been made impermissible in statutory text, the Tribunal effectively construed a provision that contained the words being outside India to include the words being non-resident.
- Misleading circular description with criteria to receive benefits: CBDT circulars of what constituted a beneficiary were construed as prequalification.
- Internal consistency: Various interpretive norms used in identically structured Explanations 1(a) and 1(b).
- High Court to Tribunal precedent: After the High Court interpretation, Asia over Tribunal ratio.
- The residential status is decided on de novo on a year to year basis: The ITAT interpretation contravenes the basic and established principle of law.
To the extent that this judgment is upheld, it would make a major break with the established interpretation that Explanation 1(b) applies to current circumstances (physically outside India and visiting) and not historical classification (having been non-resident in past years).
The right legal interpretation, according to the language of the statute, Karnataka HC case law, and principles of interpretation, is that Explanation 1(b) relates to any Indian citizen or PIO who is physically outside India and visits India, despite whether or not they had been resident in earlier years.
