Big setback for Tiger Global as SC rules against Co in taxation claim over stake sale in Flipkart

Jan 15, 2026

Synopsis
Tiger Global’s Mauritius tax structure came under sharp judicial scrutiny as the Supreme Court set aside a Delhi High Court order granting capital gains tax relief on its Flipkart exit.

In a landmark ruling on the use of international tax treaties by companies, the Supreme Court on Thursday set aside the Delhi High Court’s judgment that had exempted Mauritius-based private equity firm Tiger Global International III Holdings and its related entities from capital gains tax on the Flipkart stake sale to U.S. retailer Walmart in 2018.

Welcoming the judgment, Additional Solicitor General N Venkataraman, who appeared for the department, told ET that “This judgment defines the emerging role of India in the new Geo Political tax jurisprudence and enhances the passionate vision of Viksit Bharat 2047.”

The High Court had, in August 2024, overturned a 2020 decision by the Authority for Advance Rulings (AAR), which had denied Tiger Global the benefits of the India-Mauritius Double Tax Avoidance Agreement (DTAA) on the grounds that the transaction was, prima facie, structured to avoid tax.

The AAR had also stated in March 2020 that the India-Mauritius treaty did not intend to exempt capital gains arising from the transfer of shares in non-Indian companies.

Placing reliance on various sources such as CBDT circulars, Shome Committee Report, Vodafone & Azadi, the SC held that once it is factually found that there was an impermissible arrangement for realising capital gains under the India-Mauritius treaty, benefit under Article 13(4) of the DTAA would not be available.

The crucial judgment, which was reserved for months, will now determine how international investors from Mauritius, Singapore and other treaty countries that serve as key gateways for foreign capital, play and structure their long bets on India stories.

Sandeepp Jhunjhunwala, Partner at Nangia Global said, "While the detailed reasoning of the Court is awaited, the verdict signals a stricter approach to tax treaty interpretation and a heightened emphasis on economic substance over legal form."

"The Supreme Court, while allowing the Revenue’s appeal in the Tiger Global matter, held that the mere possession of a TRC does not preclude a detailed enquiry where an interposed entity is alleged to be a conduit for tax avoidance."

"It sets out a clear prompt for investors to reassess holding structures and exit strategies, potentially dampening foreign investment appetite and altering how future M&A transactions involving India inbound, are structured."

"This approach reinforces the principle that treaty benefits are available only to genuine tax residents and not to layered structures, if created to secure unintended tax advantages. Where the evidence demonstrates that intermediary entities function merely as conduits, lacking real economic purpose, decision-making authority, or business activity, the Revenue could pierce the structure and deny treaty protection," he added.

Commenting on the judgment, Gagan Kumar, Partner, Khaitan Legal Associates said, "The Supreme Court has clarified that indirect transfers, as contemplated under the Act following the Vodafone judgment, do not fall within the protective ambit of tax treaties; consequently, there is no occasion to invoke treaty provisions in respect of such transactions. The Court further observed that while a developing nation may, for a period, overlook or tolerate instances of treaty abuse, it remains well within its sovereign right to reclaim its taxing authority. This reclamation was effected through legislative amendments introducing GAAR provisions and by the comprehensive renegotiation of the relevant tax treaty in 2016."

"In this backdrop, the Court held that earlier CBDT Circulars which suggested that the mere possession of a Tax Residency Certificate (TRC) constituted sufficient evidence of residency now stand eclipsed and superseded. The judgment ultimately reinforces the enduring adage that aggressive tax planning often invites equally stringent and far-reaching countermeasures from the Revenue," added Kumar.

The high-stakes dispute originated in 2018 when Tiger Global sold shares it held in Flipkart Singapore (which, in turn, held stakes in Flipkart India) to another foreign investor linked to Walmart.

The Flipkart Singapore shares were held by Tiger Global entities in Mauritius -- which, like Singapore, has a tax treaty with India. No capital gains tax was paid because it was considered an “indirect transfer”: no shares of Flipkart India were directly transferred; instead, Tiger Global Mauritius sold shares of Flipkart Singapore, which controlled Flipkart India.

Under the treaties, investors from treaty jurisdictions are exempt from capital gains tax on such indirect transfers of Indian assets.

However, the Income Tax Department challenged the arrangement, arguing that Tiger Global Mauritius was merely a vehicle to avoid tax by exploiting the treaty.

Insisting that Tiger Global Mauritius lacked “substance,” the tax authorities raised a demand of ₹14,500 crore (over $1.7 billion at current exchange rates), disregarding the Tax Residency Certificate (TRC) that Tiger Global had obtained from the Mauritian authorities.

The move raised questions about the reliability of TRCs used by foreign investors for tax planning.

“The court's decision could have a significant impact on the taxation of global investment funds operating in India. Depending on the verdict, investment funds may have to factor in revised tax costs in their IRR (internal rate of return) calculations when evaluating Indian investments, which could influence their attractiveness,” said Bijal Ajinkya, partner at the law firm Khaitan & Co, to ET Bureau before the ruling.

Pranav Sayta, National Leader, International Tax and Transaction Services, EY India, said, "In particular one would need to carefully understand the implications arising from the Judgement relating to applicability of GAAR (General Anti Avoidance Rules) under the Indian Income Tax Act (Act), including the observations regarding the grandfathering of capital gains arising on sale of investments made (shares acquired) before 1 April 2017 under the provisions of the amended DTAA (Treaty) between India & Mauritius."

"Also of great interest may be the observations in regard to the Tax Residency Certificate, applicability of Circulars issued under the Act, and indeed the observations of Justice Pardiwala in regard to principles of Tax Sovereignty. The Judgement will be read with immense interests by stakeholders globally and not just in India.

"While the Judgement relates to Capital Gains arising to a Taxpayer seeking the benefit of the India Mauritius Treaty, the principles laid down in the Judgment are likely to impact Taxpayers from various Jurisdictions including for instance Taxpayers seeking relief under the India Singapore Treaty, it clarified.

[The Economic Times]