Experts have described the Supreme Court’s ruling in the Tiger Global-Flipkart capital gains dispute as a pivotal shift in India’s approach to international tax treaties, potentially reshaping foreign investment structures, increasing litigation, and introducing greater uncertainty for overseas investors.
The apex court, in a bench led by Justices JB Pardiwala and R Mahadevan, held that capital gains from Tiger Global’s stake sale in Flipkart to Walmart in 2018 are taxable in India. The judgement reinforces India’s sovereign right to tax income generated within its borders and states that treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA) cannot be claimed mechanically when facts point to abuse. Tax experts opined that the judgment is also likely to have an overriding effect on investments which were grandfathered through India-Mauritius treaty and the same may be questioned on the economic reality.
Tejas Desai, partner and leader, financial services tax, EY India, said, “The Azadi Bachao Andolan judgment, CBDT Circular No. 789, and the express provision grandfathering of investments made prior to April 1, 2017, from GAAR were designed to provide certainty and protect legitimate investor expectations, following the renegotiation of the Mauritius and Singapore tax treaties and the introduction of GAAR.”
“However, the Supreme Court’s interpretation that Rule 10U(2) effectively dilutes the primacy of the date of investment under Rule 10U(1)(d) has the potential to significantly erode this certainty and may unsettle long-standing assumptions relied upon by foreign investors both FDI and FPI, when structuring their investments and future exits.”
Challenge to Grandfathering
Anuradha Dutt, managing partner of DMD Advocates, stated that the judgment seems to be upsetting a well-established law and the views of a larger bench. “Can you apply GAAR (General Anti-Avoidance Rule) to transactions which have been grandfathered? This seems a little difficult to understand. India has a tax sovereignty but once the executive takes a decision then it must abide by it. You can’t start unsettling it,” Dutt said. Highlighting the aspect of tax certainty, Dutt stated that this ruling will worry the foreign investor.
Reassessing Returns
Gouri Puri, partner at Shardul Amarchand Mangaldas & Co, underscored the broad ripple effects stating that the Tiger Global’s case will impact all current and prior merger and acquisition (M&A) deals where tax treaty benefits have been claimed. “Private equity players and FPIs need to look at their investment structures and rethink returns. Tax litigation around tax treaty claims may increase and impact the tax insurance market.”
Amit Maheshwari, managing partner at AKM Global, called the ruling a “decisive shift in India’s treaty interpretation jurisprudence,” particularly for Mauritius-based structures. “The court has categorically held that the mere possession of a TRC does not, by itself, preclude scrutiny when the surrounding facts indicate a lack of commercial substance,” he stated.
Maheshwari added that the judgment aligns with post-2017 DTAA amendments to curb abuse and signals “the end of mechanical treaty benefit claims based solely on TRCs,” with potential overriding effects even on grandfathered investments.
Experts cautioned that the judgement could prompt private equity, venture capital, and foreign portfolio investors to reassess treaty reliant structures, potentially deterring inflows at a critical juncture for India’s economy.
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