What did the Supreme Court hold on Tiger Global?

Transcript:

In 2018, American investment firm Tiger Global sealed a $1.6 billion deal to sell their shares in Flipkart to American retail giant Walmart. Just for a little perspective, that’s 14,500 crore rupees. Claiming that this transaction was taxable, the Indian tax department withheld approximately 967 crore rupees at source, triggering a massive legal battle between the Indian government and one of the biggest offshore investors in India’s startup economy.

Hi everyone and welcome to SCO Explains. My name is Shalom Gauri and today we’re going to look at a recent decision of the Supreme Court on Tiger Global. Let’s start with a little bit of context. In 1982, India and Mauritius signed a double taxation avoidance agreement in order to facilitate business between the two countries. At first, the treaty made it clear that if an entity gains capital from transfer of shares, those gains will only be taxable in the entity’s country of residence. However, under Mauritius domestic law, gains earned from transfer of shares are not taxable. This created a neat little gap in the law. If an entity is incorporated in Mauritius but gains capital from transfer of shares located in India, those gains would not be taxable in either country. As a result, several corporations started round tripping their investments through Mauritius in order to avoid taxation. In 2016, the treaty was amended to prevent such abuse. This was done by shifting to a source based approach by which taxation was determined by the source of capital gain rather than residence of the seller.

Now let’s get back to Tiger Global. They claimed tax exemption on the 2018 transaction on the basis that a) they had tax residency certificates granted by Mauritius that established their entitlement to treaty benefits and b) that they were protected from amendments made to the treaty and to Indian domestic law because their Flipkart shares had been acquired prior to the 1st of April 2017. Now this is a really critical date in the case because it’s the date on which amendments to the treaty and to Indian domestic law came into force. Article 13 of the Treaty and Rule 10U of the Indian Income Tax act grandfather investments made prior to this date, essentially allowing them to be governed by the pre amendment regime. On 15 January 2026, the Supreme Court denied tax exemption to Tiger Global. It found that treaty benefits are only available for direct transfers and that the 2018 transaction amounted to an indirect transfer. This is because the shares being sold belong to Flipkart, which is incorporated in Singapore but derives substantial value from assets located in India.

The Court further held that tax residency certificates do not prevent scrutiny into the true nature of an agreement, and it affirmed the Tax Authority’s prima facie finding that the Mauritius entities were mere conduits of Tiger Global designed for tax avoidance. It did so by applying principles of anti avoidance and substance over form. Last Sunday, my colleague Namrata Banerjee wrote about this decision in our weekly newsletter. She argued that the verdict has reopened several questions around indirect transfers under tax treaties. When India introduced indirect transfer provisions in 2012, the Finance Minister had clarified that they would not override treaty protections. Even in this case, the Tax Department had accepted that indirect transfers fall under the residuary clause of Article 13. However, the court has held otherwise. From the standpoint of tax administration, the verdict is seen as restoring balance between treaty interpretation and domestic anti avoidance policy.

But critics warn that it could open unjustifiable windows to examine offshore deals. Namrata pointed out that one thing is clear. Incorporation documents and tax residency certificates are no longer sufficient to secure treaty protection. Courts and tax authorities alike are likely to look into where decision making truly lies and whether tax residency reflects genuine commercial substance. Recalling Justice J.B. Pardiwala’s affirmation that taxation is an inherent sovereign right, Namrata notes that the decision may sound less like a statement of principles and more like a warning to India’s foreign investors.

Namrata’s complete analysis is now available on our website, but if you want timely updates and insights to crucial developments in the Supreme Court, then make sure you sign up for our weekly newsletter. You can also find a detailed summary of the judgment and key documents from the case, along with facts of the matter, on our Case Background page.

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