The Supreme Court on Thursday ruled against US-based investment firm Tiger Global in its challenge to taxation on a major stake sale in ecommerce firm Flipkart, news agency Reuters reported.
The apex court said tax authorities had correctly rejected 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.
The case centred on whether taxes should apply to Tiger Global’s sale of its Flipkart stake to Walmart in 2018. The sale, valued at ₹144.4 billion, or about $1.6 billion, formed part of Walmart’s $16 billion acquisition of the Indian ecommerce firm that year.
The dispute focused on Tiger Global’s use of the India–Mauritius tax treaty to claim exemption from taxes on the gains. Indian tax authorities argued that the firm had wrongly relied on the treaty and should be taxed in India.
Tax officials maintained that the Mauritius-based entities acted merely as conduits for Tiger Global’s US operations, a claim the investment firm consistently denied. Tiger Global argued that the treaty permitted such exemptions and that its structure complied with the law.
The apex court heard the case after Indian tax authorities challenged an earlier Delhi High Court ruling that had gone in favour of Tiger Global and found no violation.
What did the Delhi High Court order say?
The appeal before the Supreme Court arose from an August 2024 judgment of the Delhi High Court, which had ruled in favour of Tiger Global. In its ruling, the high court held that Tiger Global was entitled to capital gains tax exemption under the India–Mauritius Double Taxation Avoidance Agreement (DTAA).
It overturned an earlier decision of the Authority for Advance Rulings (AAR), which had denied treaty benefits on the ground that the transaction was structured to avoid taxes and involved an indirect transfer outside the scope of the DTAA.
The high court relied on the DTAA’s grandfathering provision, noting that under Article 13(3A), capital gains from shares acquired before April 1, 2017 are exempt from Indian taxation. It also held that a valid Tax Residency Certificate issued by Mauritius was sufficient proof of eligibility for treaty benefits, citing the Supreme Court’s ruling in Union of India v. Azadi Bachao Andolan.
The court rejected the tax department’s contention that Tiger Global’s Mauritius entities lacked commercial substance, observing that they complied with local laws and regulatory requirements.
Government’s objections
The government challenged the high court’s findings, pointing to amendments made to the India–Mauritius DTAA in May 2016, which allow India to tax capital gains from the sale of shares acquired on or after April 1, 2017. While the grandfathering clause protected earlier investments, authorities argued that the 2018 transaction was routed through Mauritius entities solely to claim treaty benefits.
Tax officials also contended that the Mauritius-based entities were controlled by Tiger Global’s US parent, Tiger Global Management LLC, and lacked independent decision-making, effectively serving as conduits.
The AAR had earlier taken the view that the DTAA was intended to exempt gains from the transfer of shares of Indian companies, not foreign entities such as Flipkart Singapore, even if those entities derived substantial value from assets located in India.
Walmart, which competes with Amazon in India’s rapidly expanding online retail market, has not commented publicly on the matter so far.
