Understanding the Supreme Court's Landmark Ruling on Tiger Global and its Implications

Feb 7
5 min read

Supreme Court’s Landmark Ruling In the Case of Tiger Global [1]

Commercial substance in a transaction is a must for claiming treaty benefit

TRC alone is not conclusive proof of residence

The Facts

i. Tiger Global International II, III & IV Holdings (‘Tiger Global Entities’) are companies incorporated under the laws of Mauritius, created with the objective of undertaking investment activities.	vi.	Tiger Global Entities purchased shares of Flipkart Pvt. Ltd. (‘Flipkart Singapore’) prior to the year 2017. The shares of Flipkart Singapore derived their value substantially from assets located in India.
ii. Tiger Global Entities maintained office, bank accounts, employees, and audited accounts in Mauritius, and held Tax Residency Certificate’s (‘TRCs’) issued by Mauritius Revenue Authority and held PAN in India.	vii.	Tiger Global Entities transferred shares of Flipkart Singapore to FIT Holdings S.A.R.L., (Luxembourg company). Transfer of shares was part of a transaction involving acquisition of Flipkart Singapore by Walmart.
iii. On the basis of TRCs, Tiger Global Entities claimed to be residents of Mauritius under the laws of Mauritius and under the Double Taxation Avoidance Agreement (‘DTAA’) between India and Mauritius.	viii	Prior to the transfer of shares, Tiger Global Entities filed applications under section 197 of the Income-tax Act, 1961 (‘IT Act’) seeking nil tax withholding certificate.
iv. Tiger Global Entities engaged services of Tiger Global Management, USA (‘TGM’) for its investment activities, subject to review and approval by the Board in Mauritius.	ix	Applications filed by Tiger Global Entities seeking nil tax withholding certificate were rejected by the income tax department, India.

The Litigation

Aggrieved by the non-issuance of nil tax withholding certificate, Tiger Global Entities approached Authority for Advance Rulings (‘AAR’) seeking a ruling:

Whether gains from sale of shares of Flipkart Singapore would be chargeable to tax in India under the IT Act and the DTAA.

AAR rejected the applications of Tiger Global Entities stating that the entire transaction is prima facie designed for avoidance of tax and thus the applications cannot be considered by AAR. The AAR, inter alia, held:

Tiger Global Entities are conduit/shell companies, lacking independent commercial operations and substantive activity in Mauritius
Real control and management is exercised outside Mauritius i.e. in the US.
TRC is not conclusive proof of residence
Primary purpose of Tiger Global Entities was to obtain a treaty-based capital gains tax exemption.

Aggrieved by the order of AAR, Tiger Global Entities approached the High Court of Delhi challenging the order of the AAR.

The High Court quashed the AAR order and inter alia held:

Tiger Global entities were not shell or conduit entities. Boards of Directors in Mauritius exercised independent judgment.

TRCs issued by Mauritius authorities constituted sufficient proof of residence and eligibility for treaty benefits.
Treaty shopping alone is not impermissible; it is relevant only if it constitutes tax evasion and which is not established in this case.
Pre-2017 investments being grandfathered under DTAA, cannot be overridden by provisions of IT Act.

Supreme Court Judgment

The Income Tax department challenged the order of the High Court, before hon’ble Supreme Court. The hon’ble Supreme Court allowed the revenue department’s contentions and held that: I. Tiger Global Entities are not entitled to any benefit under the DTAA, and the capital gains arising from the sale of shares of Flipkart (Singapore) are taxable in India. II. Tiger Global Entities were structured primarily to obtain tax benefits under the DTAA and the transaction lacked sufficient commercial substance. III. TRCs are not conclusive proof of residence and authorities are entitled to examine control and management.	IX.	On treaty interpretation, the court held: Articles of DTAA, including article 13(3A) and 13(4), must be read purposively to prevent abuse. Grandfathering provisions apply only where the transaction is commercially genuine. Indirect transfers where gains are substantially derived from Indian assets are taxable in India, notwithstanding treaty provisions. High Court misapplied the grandfathering clause, without examining commercial substance or main purpose.
IV. The real decision-making and control of the entities in the present case was outside Mauritius, in the USA, through TGM. V. Substance over form’ - Corporate structures can be disregarded if used as artificial or colourable devices for avoidance of tax.	X.	AAR correctly held that applications are inadmissible where the arrangement is prima facie designed for tax avoidance, and there is lack of economic substance.
VI. GAAR provisions being anti-abuse rules are applicable to arrangements designed for tax avoidance and operates with an overriding effect over tax treaties thus pre-2017 investments do not automatically get immunized from its applicability.	XI.	The Tiger Global Entities could not be treated as the real owners if control, management, and decision-making rested elsewhere, and the corporate veil could be pierced to determine actual entitlement to treaty benefits.
VII. The amendments introduced in the IT Act post the Vodafone judgment ensured that treaty benefits under DTAA could be denied if the arrangement lacked commercial substance or was designed to circumvent Indian tax law.	XII.	Mere presence of directors linked to parent or investment management entities does not protect an arrangement from being treated as abusive where the main purpose is tax avoidance.

Chamber Comments

The Judgment has ushered in a new era of treaty interpretation, marking a shift from ‘form’ based interpretation to ‘substance’ based interpretation.
This shift in treaty interpretation will embolden the revenue department resulting in a deeper scrutiny of, perhaps, every international transaction to analyse whether the transaction has commercial substance or it is merely a conduit for tax evasion.
Consequently an increase in litigation is on the cards, as every DTAA will now be up for interpretation and likely denial of benefits therein by invoking GAAR, wherever the income tax department has reason to say that there’s lack of commercial substance in the transaction.
The observation of the hon’ble Supreme Court that the objective of a DTAA is to prevent double taxation and not ‘double non-taxation’, will henceforth demand from the assessees/tax payers that they’ll have to show that tax has been paid in one of the jurisdictions.
Until the judgment came out, TRC was routinely being considered as the proof of residency. However, post the judgment this scenario changes as TRC will no longer be the gold standard to prove residency.
Residency henceforth will be a culmination of factors such as substantive commercial activity, payment of taxes, control and management etc. from the jurisdiction of which residency is claimed.

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[1] AAR (Income Tax) & Others vs. Tiger Global International Holdings, Civil Appeal Nos. 262–264 of 2026, 15.01.2026