India’s top court has convicted Tiger Global in a tax case over its exit from Flipkart in its 2018 takeover of Walmart, a decision that strengthens New Delhi’s ability to challenge offshore treaty structures and could increase tax risk for global funds counting on predictable outflows from one of the world’s fastest-growing major markets.
India’s Supreme Court on Thursday sided with tax authorities in a dispute over whether Tiger Global could use its Mauritius-based entities to claim protection under the India-Mauritius tax treaty and avoid paying capital gains tax in India on profits linked to its exit from the Walmart-Flipkart deal. The ruling overturned a 2024 Delhi High Court judgment that had overturned a 2020 order by the Preliminary Ruling Authority, which had found that the company was prima facie a tax evader and therefore ineligible for treaty exemption.
The decision is being closely watched by investors as it strengthens India’s hand in challenging offshore “treaty routing” structures that have long been used to reduce tax on high-value exits. It could also increase uncertainty over how future cross-border deals are structured and priced at a time when foreign capital is banking on India as a key growth market.
In its verdict, a two-judge bench he said (PDF) that where a transaction appears, prima facie, to be designed to avoid income tax, India’s default mechanism cannot be used to seek protection.
Tiger Global first invested in Indian e-commerce company Flipkart in 2009 with an initial investment of $9 million, before increasing its exposure to around $1.2 billion in multiple rounds of funding, TechCrunch previously reported. The company later sold its stake to Walmart for about $1.4 billion in 2018.
The tax dispute centers on how Tiger Global structured this investment – through entities in Mauritius – and whether these vehicles could claim protection under the India-Mauritius tax treaty to shield capital gains from Indian tax.
While it sold its Flipkart stake during the $16 billion Walmart deal, Tiger Global sought a certificate allowing tax withholding, arguing that because the shares were acquired before April 1, 2017, the gains were exempt from India’s capital gains tax under a “grandfather” clause, protecting the new older tax evaders. agreement. Indian tax authorities rejected the request in 2020, questioning the offshore structure chosen by the investment firm.
The Supreme Court bench framed the dispute as a question of sovereign taxing powers, warning against structures designed primarily to curtail that power.
“Taxing an income derived from its own country is an inherent sovereign right of that country,” the bench said, adding that “any curtailment of that power through artificial arrangements is an immediate threat to sovereignty and long-term national interest.”
The decision should be read as a warning against aggressive tax planning and not a wholesale repeal of the India-Mauritius treaty framework, said Ajay Rotti, tax expert and founder and managing director of tax consultancy Tax Compass. he wrote on X. He said the decision reinforces a broader shift towards “substance over form”, signaling treaty protection may not automatically apply where offshore entities have no real commercial activity.
Tiger Global did not respond to a request for comment.
The company can seek a review of the verdict, although such petitions are rarely successful.
