At a Glance
- India’s Supreme Court has ruled against Tiger Global in a tax dispute over its 2018 Flipkart exit.
- The court rejected the firm’s use of Mauritius-based entities to avoid capital gains tax.
- The decision tightens scrutiny of offshore treaty structures used by global investors.
- Why it matters: Foreign funds may face higher tax risk and greater uncertainty when exiting Indian investments.
India’s Supreme Court has delivered a landmark verdict against Tiger Global, upholding tax authorities’ power to challenge offshore structures used to sidestep capital gains tax. The case stems from the U.S. fund’s $1.4 billion sale of its Flipkart stake during Walmart’s $16 billion takeover in 2018.
Thursday’s decision overturns a 2024 Delhi High Court ruling that had sided with Tiger Global. It revives a 2020 order by the Authority for Advance Rulings, which found the investment firm was, at first glance, trying to avoid tax and therefore ineligible for treaty relief.
The Core Dispute
Tiger Global routed its Flipkart investment through Mauritius-based entities, seeking protection under the India-Mauritius double taxation avoidance agreement. When Walmart bought Flipkart, the fund claimed a “grandfathering” clause exempted gains from Indian tax because the shares were acquired before April 1, 2017.
Tax authorities refused to issue a no-withholding certificate in 2020, arguing the offshore structure lacked substance and was designed to escape Indian tax. The Supreme Court agreed, framing the issue as a matter of national sovereignty.
Court’s Reasoning
A two-judge bench stated that when a transaction appears designed to avoid income tax, India’s advance-ruling mechanism cannot grant treaty protection.
“Taxing an income arising out of its own country is an inherent sovereign right of that country,” the court said. “Any dilution of this power through artificial arrangements is a direct threat to its sovereignty and long-term national interest.”
Investment Timeline
| Year | Event | Amount |
|---|---|---|
| 2009 | Initial Flipkart investment | $9 million |
| Multiple rounds | Total exposure raised | ~$1.2 billion |
| 2018 | Stake sale to Walmart | ~$1.4 billion |
Tiger Global first backed Flipkart in 2009 with a modest $9 million. Over successive funding rounds, the firm’s total exposure swelled to roughly $1.2 billion. The 2018 exit generated about $200 million in profit, according to earlier News Of Philadelphia reporting.
Industry Reaction
Ajay Rotti, founder and CEO of tax advisory firm Tax Compass, said the judgment signals a shift toward “substance over form.” Writing on X, he noted treaty protection may not apply automatically where offshore entities lack real commercial activity. He cautioned that the ruling should be read as a warning against aggressive tax planning, not as dismantling the entire India-Mauritius treaty framework.
Implications for Global Funds
The verdict strengthens India’s ability to scrutinize “treaty-routing” structures long used by investors to reduce tax on high-value exits. It could raise compliance costs and pricing uncertainty for future cross-border deals at a time when foreign funds view India as a key growth market.
Tiger Global did not respond to a request for comment. The firm can still file a review petition, though such appeals rarely succeed.
Key Takeaways
- India’s top court has prioritized sovereign taxing rights over treaty shopping.
- Offshore vehicles must demonstrate genuine economic activity to claim treaty benefits.
- Future exits may require more robust substance and clearer commercial rationale.
- Expect tighter due diligence on deal structures involving multiple jurisdictions.
