India’s top court has ruled against Tiger Global in a tax case stemming from Flipkart out during Walmart 2018 takeovera decision that strengthens New Delhi’s ability to challenge offshore treaty structures and could raise tax risks for global funds that are predictably exiting one of the world’s fastest-growing major markets.
On Thursday, India’s Supreme Court sided with tax authorities in a dispute over whether Tiger Global could use a Mauritius-based entity to seek protection under the India-Mauritius tax treaty and avoid paying capital gains tax in India on profits related to its exit from the Walmart-Flipkart deal. The decision set aside the Delhi High Court’s 2024 judgment that set aside the 2020 order by the Authority for Advance Rulings, which found that the company was, prima facie, tax evading and therefore ineligible for treaty relief.
The ruling is being watched closely by investors, as it strengthens India’s hand in challenging the overseas “travel treaty” structure that has long been used to reduce taxes on high-value exits. It could also increase uncertainty about how future cross-border deals are structured and priced, when foreign funds are counting on India as a key growth market.
In its decision, a two-judge bench said (PDF) that when a transaction appears, at first glance, to be designed to avoid income tax, the Indian government’s mechanisms cannot be used to seek protection.
Tiger Global first invested in Indian e-commerce company Flipkart in 2009 with initial investment of $9 millionprevious increase exposure to about $ 1.2 billion through multiple rounds of funding, TechCrunch has previously reported. The company later sold its shares to Walmart approximately $1.4 billion in 2018.
The tax dispute centers on how Tiger Global structured the investment – through an entity in Mauritius – and whether the vehicle can claim protection under the India-Mauritius tax treaty to shield capital gains from Indian taxes.
When selling Flipkart shares during the $16 billion Walmart deal, Tiger Global requested a certificate of no withholding tax, arguing that since the shares were purchased before April 1, 2017, the gains were exempted from Indian capital gains tax under the “grandfather” clause, protecting the old investment from newer tax treaties – in the newer Indian taxes. Indian tax authorities rejected the request in 2020, questioning the offshore structure chosen by the investment company.
The Supreme Court bench framed the dispute as an issue of the sovereign’s taxing power, warning against a structure designed primarily to dilute that authority.
“Taxing income arising from one’s own country is a sovereign right of the country,” the bench said, adding that “any dilution of this power through artificial arrangements is a direct threat to its sovereignty and long-term national interest.”
The verdict should be read as a caution against aggressive tax planning rather than undermining the framework of the India-Mauritius treaty, Ajay Rotti, tax expert and founder and CEO of tax advisory firm Tax Compass, write at X. Said decision reinforces a broader shift toward “substance over form,” signaling treaty protections may not automatically apply where offshore entities lack actual commercial activity.
Tiger Global did not respond to a request for comment.
The company can seek a review of the ruling, although such petitions are rarely successful.