India’s Supreme Court has ruled against Tiger Global in a tax dispute over its exit from Flipkart during Walmart’s 2018 acquisition, potentially raising the tax risk for global funds looking for predictable exits in India. The ruling, which involves Tiger Global’s use of Mauritius-based entities to claim protection under the India-Mauritius tax treaty, strengthens New Delhi’s ability to challenge offshore treaty structures.
The Case and Court’s Decision
The case centered on whether Tiger Global could use its Mauritius-based entities to avoid capital gains tax in India following its exit from Flipkart as part of Walmart’s $16 billion acquisition. The Indian tax authorities argued that the offshore structure was a form of tax avoidance and therefore ineligible for treaty relief. On Thursday, the Supreme Court upheld the tax authorities’ stance, reversing a 2024 Delhi High Court decision that had sided with Tiger Global.
The Supreme Court’s ruling sets aside an earlier order by the Authority for Advance Ruling (AAR) and reinforces India’s position on challenging offshore treaty-routing structures. The court emphasized that when a transaction appears to be designed primarily to avoid tax, the advance ruling mechanism cannot be used for treaty protection.
Implications for Global Investors
The ruling is significant for global investors, as it highlights India’s increased vigilance regarding offshore tax structures used to minimize tax on high-value transactions. India’s tax authorities have long been concerned about such arrangements, especially in light of the country’s growing appeal as a key market for foreign investment.
Ajay Rotti, a tax expert, noted that the judgment is not a complete dismantling of the India-Mauritius treaty but a caution against aggressive tax planning. He emphasized that the decision signals a shift towards “substance over form,” suggesting that treaty protection may not apply automatically when offshore entities lack genuine commercial activity.
Tiger Global’s Investment in Flipkart
Tiger Global had first invested in Flipkart in 2009, committing $9 million initially, before increasing its stake to about $1.2 billion in subsequent rounds. When Walmart acquired Flipkart for $16 billion in 2018, Tiger Global sold its stake for around $1.4 billion. However, the firm structured its investment through Mauritius-based entities and sought tax relief under the India-Mauritius tax treaty, claiming that the gains were exempt from Indian capital gains tax due to a grandfathering clause for older investments.
Indian tax authorities rejected this request in 2020, questioning the legitimacy of Tiger Global’s offshore structure and its tax exemptions under the treaty.
Sovereign Taxing Rights
The Supreme Court reinforced India’s sovereignty over taxing income generated within its own borders. The ruling framed the issue as a matter of the country’s inherent sovereign taxing powers, warning against arrangements designed to circumvent these powers for tax avoidance.
“The income arising out of its own country is an inherent sovereign right of that country,” the bench stated, adding that any dilution of this power through artificial structures posed a direct threat to national sovereignty and long-term interests.
While the ruling strengthens India’s tax authority, it does not entirely dismantle the India-Mauritius tax treaty, which remains in place. Tiger Global, however, could seek a review of the decision, though such requests are rarely successful.
Featured image credits: Roboflow Universe
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