Tiger Global loses Supreme Court battle Over Flipkart Capital Gains Tax
Supreme Court rules against Tiger Global, denying capital gains tax exemption on Flipkart stake sale.
Tiger Global loses Supreme Court battle over Flipkart capital gains tax
The legal law firm in India, Lakshmikumaran and Sridharan Attorneys, highlighted the Supreme Court’s ruling on Thursday against US-based investment firm Tiger Global in its challenge to taxation on its sale of a major stake in ecommerce company Flipkart.
The apex court upheld the tax authorities’ rejection of Tiger Global’s application seeking exemption from capital gains tax arising from the transaction. The order was delivered by a bench comprising Justices J B Pardiwala and R Mahadevan, with a detailed judgement awaited.
Transaction structured to avoid tax, says report
The court held that once a transaction is found to be prima facie structured to avoid income tax, the statutory bar under the proviso to Section 245R(2) of the Income Tax Act, 1961 applies. In such cases, tax authorities are not required to examine the merits of taxability.
The dispute centred on Tiger Global’s sale of its Flipkart stake to Walmart in 2018, valued at ₹144.4 billion (approximately $1.6 billion), which was part of Walmart’s $16 billion acquisition of Flipkart. Tiger Global had invoked the India–Mauritius tax treaty to claim exemption from capital gains tax. However, authorities argued that the structure was designed to avoid tax in India.
The Supreme Court noted that treaty eligibility alone does not negate tax avoidance.
"Once taxability has been established on the basis that the shares sold derived their value from assets in India, the inquiry cannot be diverted merely because the shares transferred were not of an Indian company."-the court said.
The bench also observed that treaty interpretation must align with legislative intent and later statutory amendments aimed at curbing abuse.
"Undoubtedly, the mere holding of a TRC cannot by itself prevent an inquiry subsequent to the amendments brought into the statute, particularly by the introduction of Section 90(2A) and Chapter X-A… if it is established that the interposed entity was a device to avoid tax."the court added.
The appeal before the apex court arose from an August 2024 judgment of the Delhi High Court, which had ruled in favour of Tiger Global. The high court had held that the firm was entitled to capital gains tax exemption under the India–Mauritius Double Taxation Avoidance Agreement (DTAA) and that a valid Tax Residency Certificate issued by Mauritius was sufficient proof of eligibility.
The government challenged the ruling, highlighting amendments to the India–Mauritius DTAA in May 2016, which allow India to tax capital gains from shares acquired on or after April 1, 2017. Authorities contended that the Mauritius entities were controlled by Tiger Global’s US parent and lacked independent decision-making, effectively serving as conduits.
Tax experts described the Supreme Court ruling as a significant shift for foreign investors. Hemen Asher, Partner - Direct Tax at Bhuta Shah & Co. LLP, said the judgment undermines long-standing expectations around tax certainty for overseas investors, as reliance on Tax Residency Certificates is no longer sufficient.
Amit Baid, Head of Tax at BTG Advaya, described the ruling as “a major, 180-degree shift” in how treaty benefits have traditionally been claimed, noting its serious implications for private equity, hedge funds, and FPIs using Mauritius and Singapore-based structures.
L. Badri Narayanan, Executive Partner at Lakshmikumaran and Sridharan Attorneys, said,
"The Supreme Court’s ruling in the Tiger Global case overturns the High Court decision and denies treaty benefits where transactions lack genuine substance and leads to double non-taxation, signaling that a Tax Residency Certificate alone is insufficient. This judgment marks a significant shift toward substance-over-form in India’s tax regime. Application of General Anti Abuse test It also raises critical questions on what constitutes adequate commercial substance, creating uncertainty for global investors. Multinational enterprises must urgently revisit their holding structures and governance frameworks to mitigate tax risks. Clear guidance will be essential to maintain investor confidence and ensure India remains an attractive destination for cross-border investments."
The Supreme Court’s ruling in the Tiger Global case underscores a clear shift in India’s approach to cross-border taxation, prioritizing substance over form. For global investors, the judgment signals that reliance on Tax Residency Certificates alone may no longer suffice, and that the commercial substance of transactions will be closely scrutinized. Multinational enterprises are likely to reassess their investment structures and governance frameworks to mitigate tax risks and ensure compliance, while clear regulatory guidance will be crucial to maintain investor confidence in India as a preferred destination for foreign investments.
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