4 February 2026
Supreme Court Ruling on Tiger Global
Tax Treaty Eligibility and Indirect Share TransfersExecutive Summary
In a landmark decision, the Supreme Court of India has ruled on the availability of tax treaty benefits and the taxation of indirect share transfers in the Tiger Global case. The Court upheld the Indian tax authorities’ rejection of an advance ruling sought by three Mauritius-incorporated investment entities of the Tiger Global group (the “MauritiusCos”), which had claimed exemption from Indian capital gains tax on the sale of shares in a Singapore company whose value was substantially derived from Indian assets. The Court held that the MauritiusCos were not entitled to capital gains tax exemption under Article 13(4) of the India–Mauritius Double Tax Agreement (“DTA”), on the basis that the structure constituted an impermissible tax avoidance arrangement under India’s General Anti-Avoidance Rules (“GAAR”). The ruling reflects a stricter and more expansive application of GAAR and unsettles several long-standing principles relating to (i) treaty eligibility, (ii) the evidentiary value of Tax Residency Certificates (“TRCs”), and (iii) the continuing relevance of administrative circulars and earlier Supreme Court precedents. The decision is expected to have significant implications for foreign investors, particularly those investing into India through special purpose vehicles (“SPVs”) in treaty-favoured jurisdictions such as Mauritius and Singapore.
Background: The Tiger Global Transaction and Legal Dispute
Investment Structure and Transaction
Three private companies were incorporated in Mauritius in 2011 (the MauritiusCos). Their immediate shareholders were also Mauritian entities, which in turn were owned by private equity funds organised in the Cayman Islands. These Cayman funds had a diversified investor base across multiple jurisdictions. The MauritiusCos were managed by Tiger Global Management LLC, a US-based investment manager. While Tiger Global Management LLC provided investment management services, oversight and final approval authority formally rested with the boards of directors of the MauritiusCos. The MauritiusCos were established with the stated objective of undertaking investment activities and generating long-term capital appreciation. They held Category 1 Global Business Licences in Mauritius and were regulated by the Mauritius Financial Services Commission. Their boards comprised two Mauritian-resident directors and one US-resident director, and they maintained bank accounts, accounting records, and office premises in Mauritius. Each MauritiusCo also held a valid TRC issued by the Mauritian tax authorities. Between 2011 and 2015, the MauritiusCos acquired shares in Flipkart Singapore, a Singapore-incorporated holding company. Flipkart Singapore, in turn, held investments in multiple Indian operating companies, and its value was substantially derived from Indian assets. In May 2018, as part of Walmart’s global acquisition of Flipkart, the MauritiusCos sold their shares in Flipkart Singapore to a Luxembourg entity. The MauritiusCos sought a nil withholding tax certificate from the Indian tax authorities, contending that the capital gains arising from the sale were exempt under the India–Mauritius DTA. The Indian tax authorities denied the request and directed the buyer to withhold tax, citing India’s indirect transfer provisions under domestic law.Proceedings Before the AAR and the High Court
The MauritiusCos approached the Authority for Advance Rulings (“AAR”), seeking confirmation that the capital gains were exempt under Article 13(4) of the DTA. The AAR rejected the application, holding that the structure was prima facie designed for tax avoidance. It found that effective control and management rested with the US-based investment manager and that the Mauritius entities lacked sufficient commercial substance and functioned as conduit entities. The MauritiusCos challenged the AAR’s ruling before the Delhi High Court, which ruled in their favour. The High Court held that:- a valid TRC was sufficient to establish treaty eligibility in the absence of fraud or sham; and
- the exit represented a genuine commercial transaction.
Key Legal Findings of the Supreme Court
1. GAAR Applies to Pre-2017 Investments Where the Exit Occurs Post-2017
The Supreme Court clarified that GAAR applies to any arrangement that results in a tax benefit arising on or after 1 April 2017, even if the underlying investment was made before that date. The Court held that the DTA “grandfathering” provisions protect only genuine investments, not arrangements that are subsequently found to be impermissible avoidance arrangements. An “arrangement” under GAAR encompasses the investment itself, and the relevant date for GAAR applicability is the date on which the tax benefit arises, not the date of the initial investment. Accordingly, GAAR can override treaty provisions, including grandfathering clauses, where the arrangement lacks commercial substance. The Court further clarified that Article 13(3A) of the DTA, which contains the grandfathering and Limitation of Benefits (“LOB”) provisions, applies only to direct transfers of Indian shares. Indirect transfers fall under the residuary Article 13(4).2. TRC Is Not Conclusive for Treaty Eligibility
While a TRC remains a necessary requirement, the Court held that it is not conclusive evidence of entitlement to treaty benefits. Tax authorities are entitled to look beyond the TRC and examine the substance of the arrangement, including:- where effective control and management reside;
- the commercial rationale for the structure; and
- whether the entity performs meaningful economic functions.
3. Substance Over Form and the Continued Relevance of Judicial Anti-Avoidance Rules (JAAR)
The Court reaffirmed that treaty benefits may be denied where arrangements are abusive, lack commercial substance, or involve conduit entities, even if they formally comply with treaty requirements. Importantly, the Court held that Judicial Anti-Avoidance Rules (“JAAR”) continue to apply alongside GAAR. Accordingly, even where GAAR is not technically invoked, courts may deny treaty benefits under the JAAR.4. Requirement to Demonstrate Taxability in the State of Residence
The Court introduced a significant additional requirement: to claim treaty benefits, a taxpayer must demonstrate that the relevant gains are taxable in the state of residence. This marks a departure from earlier jurisprudence, which focused on “liability to taxation” rather than actual taxability, and may have broader implications for treaty interpretation going forward.5. Impact on Circulars and Earlier Supreme Court Precedents
The Supreme Court held that earlier administrative circulars and judicial precedents (including Azadi Bachao Andolan and Vodafone) must be read in light of subsequent statutory amendments and the introduction of GAAR. In particular, Circular No. 789, which treated TRCs as conclusive evidence of residence, was held to be no longer binding in cases involving GAAR and alleged abuse.
Practical Implications for Investors
a. Increased Uncertainty: The ruling disrupts long-standing treaty-based structuring assumptions and introduces uncertainty for foreign investors using SPVs in low-tax jurisdictions.
b. Enhanced Scrutiny: Tax authorities are likely to intensify scrutiny of governance, control, and commercial substance, particularly for legacy holding structures.
c. PPT Considerations: Once the Principal Purpose Test (“PPT”) becomes applicable, scrutiny of treaty benefits is expected to become even more stringent.
c. Impact on Ongoing Disputes: Existing disputes involving indirect transfers or treaty claims may be materially affected by this precedent.
d. Substance is Critical: Investors should proactively review and strengthen governance, board independence, decision-making processes, and operational substance in treaty jurisdictions. Reliance on TRCs or grandfathering alone is no longer sufficient.
