The Supreme Court of India has ruled against Tiger Global in a long-running tax dispute arising from its 2018 sale of a Flipkart stake to Walmart, holding that the transaction was structured for tax avoidance and is therefore not entitled to income-tax relief under the law.
Background of the Dispute
The case stems from Tiger Global’s exit from Flipkart when the U.S. retailer Walmart acquired a controlling interest. Tiger Global used Mauritius-based entities to sell shares in Flipkart’s Singapore holding company, and sought capital gains tax exemption under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). Tax authorities challenged this, alleging the arrangement was set up mainly to avoid Indian tax and lacked commercial substance. The Authority for Advance Rulings (AAR) had rejected Tiger Global’s application on that basis, but the Delhi High Court later granted relief. The matter was appealed to the Supreme Court.
Supreme Court’s Decision
The Supreme Court set aside the High Court’s decision and restored the AAR’s position by holding that the transaction was prima facie designed for tax avoidance and could therefore not attract treaty benefits.
The Court reaffirmed that the threshold bar under Section 245R(2) of the Income Tax Act applies when a transaction lacks genuine commercial substance and is aimed at avoiding tax.
By treating the structure as an impermissible avoidance arrangement, the Court held that Tiger Global could not claim exemption under Article 13(4) of the India-Mauritius DTAA for capital gains arising from the deal.
The judgment also confirmed that merely having a Tax Residency Certificate (TRC) is insufficient to claim treaty benefits where anti-avoidance rules (such as GAAR) apply.
Implications
This landmark ruling signals a stricter approach to treaty interpretation and anti-avoidance enforcement in India. It clarifies that foreign investors cannot obtain tax exemptions simply through treaty route planning if the transaction’s essence is to sidestep Indian tax liability. The decision is likely to have wide implications for international investment structures and cross-border deals involving Indian assets, reinforcing that capital gains from such arrangements may be taxed in India if they lack genuine economic substance.
