SC: Tiger Global not Eligible for Mauritius Treaty Exemption on Flipkart Share Sale

Supreme Court: Tiger Global Not Eligible for Mauritius Treaty Exemption on Flipkart Share Sale

What is background of Tiger Global case on the exemption on Flipkart Share Sale

Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings¹ (collectively, the taxpayer) are private companies limited by shares, incorporated in Mauritius. The taxpayer held valid Tax Residency Certificates issued by the Mauritius Revenue Authority and was primarily set up to undertake investment activities with the objective of earning long-term capital appreciation and investment income. The taxpayer held a Category 1 Global Business Licence in Mauritius and was regulated by the Financial Services Commission of Mauritius.

Investment Structure and Transaction: The taxpayer acquired shares in Flipkart Private Limited, Singapore (“Flipkart Singapore”) during the period 2011 to 2015. Flipkart Singapore derived substantial value from underlying assets located in India, including Flipkart India and other Indian group entities. In 2018, the taxpayer transferred its shareholding in Flipkart Singapore to Fit Holdings, a company incorporated in Luxembourg, as part of Walmart’s acquisition of Flipkart.

Proceedings before the Tax Authorities:

Prior to the transfer, the taxpayer applied to the Indian tax authorities for a nil withholding tax certificate, which was denied. The taxpayer thereafter approached the Authority for Advance Rulings seeking a ruling on the taxability of capital gains in India under the India–Mauritius Double Taxation Avoidance Agreement.

Authority for Advance Rulings’s Findings and Rejection: The Authority for Advance Rulings rejected the application at the threshold, holding that the transaction was prima facie designed for tax avoidance and therefore not fit for admission u/s 245R(2) of the Income-tax Act, 1961².

In its order, the Authority for Advance Rulings observed that: The effective control and management of the taxpayer was not located in Mauritius, but in the United States; The sole director of the ultimate US holding company was a signatory to the Mauritius bank accounts and was the beneficial owner of the taxpayer; The board of directors in Mauritius were merely nominal and lacked independent decision-making authority; The taxpayer carried on no real commercial or economic activity in Mauritius and functioned as a conduit entity established to avail treaty benefits.  On this basis, the AAR concluded that the structure lacked commercial substance and was set up primarily for tax avoidance.

High Court Proceedings:

The taxpayer challenged the Authority for Advance Rulings’ rejection before the Delhi High Court. The Delhi High Court quashed the AAR’s order, holding that The transaction was not designed for tax avoidance; and Capital gains arising from the transfer of shares acquired prior to 1 April 2017 were grandfathered under the India–Mauritius Double Taxation Avoidance Agreement.

Appeal before the Supreme Court: Aggrieved by the Delhi High Court’s decision, the Revenue appealed to the Supreme Court. The Supreme Court examined whether the Authority for Advance Rulings was justified in rejecting the ruling application as not maintainable by prima facie treating the transaction—namely, the sale of shares of a Singapore company substantially deriving value from Indian assets, by a Mauritius entity controlled by a US parent—as an impermissible avoidance arrangement and consequently declining to inquire into the taxability of the resulting capital gains under the Income-tax Act, 1961, read with the applicable tax treaty provisions.

What the Supreme Court Held

The Supreme Court of India has ruled that Tiger Global’s Mauritius entities are not entitled to capital gains tax exemption under the India–Mauritius Double Taxation Avoidance Agreement on their 2018 sale of Flipkart Singapore shares.( Decision Dated on 15 January 2026 under the Case Civil Appeal Nos. 262–264 of 2026, at New Delhi). The ruling decisively applies General Anti‑Avoidance Rules over treaty claims, reshaping the contours of international tax planning involving India. The Court held that:

• The arrangement was an impermissible avoidance arrangement : Under India’s General Anti‑Avoidance Rules (GAAR), the structure lacked commercial substance and was primarily set up to avoid Indian tax. Thus, Tiger Global cannot use grandfathering provisions or treaty protections.
• TRC (Tax Residency Certificate) is not conclusive : A TRC is only a threshold requirement, not a final proof of tax residency. Tax authorities may examine actual commercial substance, control and management, purpose of the arrangement, real economic activity in Mauritius. In Tiger Global’s case, the Court agreed that commercial substance was insufficient.
• Capital gains were taxable in India under domestic law : Because SCO’s shares derived substantial value from assets located in India, Explanation 5 to section 9(1)(i) of the Income Tax Act applied. Thus, the gains are deemed to accrue in India.
• General Anti‑Avoidance Rules overrides treaty benefits : Even though Mauritius investments prior to 1 April 2017 are “grandfathered,” this protection is not absolute. If General Anti‑Avoidance Rules is invoked then treaty benefit denied.
• Authority for Advance Rulings was right to reject Tiger Global’s application : AAR is barred from admitting cases where a transaction appears prima facie tax‑avoidance‑driven (Section 245R(2)). The Supreme Court upheld AAR’s rejection.
• India’s tax sovereignty reaffirmed : The Court underlined that nations retain an inherent right to tax income arising from their territory and to counter aggressive tax planning.

Key Facts Recap

• Tiger Global Mauritius entities held Category 1 GBL + Tax Residency Certificate.
• Shares sold: Flipkart Singapore (which owned substantial Indian operations).
• Buyer: A Luxembourg entity, as part of Walmart’s 2018 Flipkart acquisition.
• Authority for Advance Rulings rejected ruling: High Court allowed treaty benefit then Supreme Court overturned.

Implications for Foreign Investors on Mauritius Treaty Exemption on Flipkart Share Sale

• TRC alone is insufficient & Expect scrutiny of Board control & decision-making, Funding flows, Economic activity, Exit planning & timing
• Tax-friendly holding jurisdictions face higher risk: Shell or conduit entities will not survive General Anti‑Avoidance Rules review. Holding‑company structures routed through tax‑friendly jurisdictions face higher risk.
• India-value-derived share sales are taxable: Unless backed by strong commercial substance., so Any India‑value‑derived share sale is taxable unless strong commercial substance exists
• General Anti‑Avoidance Rules applies even to pre-2017 investments: Grandfathering is conditional, not guaranteed. General Anti‑Avoidance Rules can neutralize treaty benefits even for pre‑2017 investments

Why This Judgment Matters :

The Supreme Court’s ruling in Tiger Global underscores India’s sovereign right to tax income arising from India-linked value. Cross-border transactions involving Indian assets or businesses are therefore likely to face heightened scrutiny, with tax authorities focusing more sharply on the commercial rationale underlying such arrangements.

Multinational groups may need to reassess their holding and transaction structures where treaty benefits are sought across income streams—including, but not limited to, direct or indirect transfers, dividends, interest, and other returns. Greater emphasis will be placed on demonstrating commercial substances, supported by robust contemporaneous documentation covering control, decision-making, funding, and exit planning.

At the same time, the decision is fact-specific, with the Court’s observations closely tied to the factual matrix before it. That said, the judgment lays down an important and binding principle: a Tax Residency Certificate is not conclusive and does not preclude an independent inquiry into treaty eligibility. Tax authorities may examine the surrounding substance of the arrangement, including the commercial justification for the chosen structure (such as SPV formations) and the manner of exit.

Looking ahead, it will be important to monitor how this ruling is applied in the post-MLI environment. In the context of the India–Mauritius tax treaty, the protocol incorporating the principal purpose test has not yet come into effect. Further, CBDT Circular No. 1/2025 dated 21 January 2025 clarifies that the grandfathering provisions under the Mauritius, Singapore, and Cyprus treaties remain outside the scope of the principal purpose test.

However, notwithstanding the absence of Principal Purpose Test applicability, legacy structures may continue to face scrutiny under General Anti‑Avoidance Rules and judicial anti-avoidance principles, as reaffirmed by the Supreme Court in this case.

This is one of the most consequential General Anti‑Avoidance Rules rulings since its introduction. The Court has clearly laid down that If commercial substance is weak, treaty benefits will not stand—even if the entity has a Tax Residency Certificate. It signals a stronger stance against round‑tripping, treaty abuse, and resident‑shell structures. And the Supreme Court has sent a clear message: Treaty benefits cannot survive where commercial substance is weak tax residency certificate notwithstanding.

Complete Case Link