Supreme Court Rejects Tax Treaty Shield, Rules Tiger Global Liable For Capital Gains On Flipkart Sale

The Supreme Court ruled on Thursday (15 January) that US investment firm Tiger Global must pay capital gains tax on its $1.6 billion stake sale in Flipkart, rejecting claims for exemption under the India-Mauritius tax treaty.

The landmark verdict, delivered by Justices J B Pardiwala and R Mahadevan, overturned a Delhi High Court judgement that had ruled in favour of the investment firm just five months earlier.

The dispute centred on Tiger Global's 2018 exit from e-commerce giant Flipkart during Walmart's $16 billion acquisition.

The firm had structured the transaction through Mauritius-based entities, seeking to claim tax exemptions under the Double Taxation Avoidance Agreement between India and Mauritius.

Tax authorities raised a demand of approximately Rs 14,500 crore, arguing the Mauritius entities lacked economic substance and served merely as conduits for the US parent company.

The Supreme Court held that the investment structure was designed to avoid Indian tax and therefore constituted impermissible tax avoidance.

The court stated that once taxability had been established on the basis that shares derived their value from assets in India, the inquiry could not be diverted merely because the shares transferred were not of an Indian company.

The ruling invoked the General Anti-Avoidance Rule provisions under the Income Tax Act.

Tax experts say the verdict signals a stricter approach to treaty interpretation, emphasising substance over form.

The court rejected arguments that a Tax Residency Certificate alone could establish eligibility for treaty benefits, potentially affecting thousands of foreign investors who use Mauritius and Singapore as gateways to the Indian market.

The ruling could open up a Rs 20,000 crore opportunity for tax authorities to examine similar investment structures, with implications for private equity firms, hedge funds and foreign portfolio investors operating in India.

Please click here to add Swarajya as your preferred and trusted news source on Google