SC overturns Delhi HC, backs tax department in Tiger Global’s $1.6-billion Flipkart exit case

In a major setback for Tiger Global Management, the Supreme Court upheld the income tax department’s claim that capital gains from the US investor’s $1.6-billion exit from Flipkart in 2018 are taxable in India, overturning a Delhi High Court ruling that had favoured the fund.

A bench of Justices J.B. Pardiwala and R. Mahadevan set aside the High Court’s August 2024 judgment and restored the tax demand, a decision that is expected to significantly influence how India taxes foreign investment and interprets the India–Mauritius Double Taxation Avoidance Agreement (DTAA).

The dispute centres on Tiger Global’s partial exit from Flipkart during Walmart’s $16-billion acquisition of a controlling stake in the e-commerce firm in 2018, one of India’s largest cross-border transactions. Tiger’s Mauritius-based entities received approximately $1.6 billion from the deal.

At issue was whether Tiger Global could claim capital gains tax exemption under the India–Mauritius DTAA, or whether its Mauritius companies were merely “front” entities controlled from the US, rendering the treaty claim invalid and the profits taxable in India.

The long trail

Tiger Global had invested in Flipkart in its early years through several Mauritius entities — Tiger Global International II, III and IV Holdings — a structure widely used by foreign investors at the time because the 1983 tax treaty allowed Mauritius residents to sell shares of Indian companies without paying capital gains tax in India.

Mauritius subsequently became India’s largest FDI source, accounting for roughly 25 percent of total inflows, with investments of over $177 billion between April 2000 and September 2024, according to DPIIT data.

India amended the treaty in 2016 to curb tax avoidance, deciding that shares acquired on or after 1 April 2017 would be taxed in India, while earlier investments would be grandfathered, subject to conditions. Tiger Global’s investments predated the cut-off.

Before receiving the Flipkart proceeds in 2018, Tiger’s Mauritius firms sought permission from Indian tax authorities to remit the funds without tax deduction. The request was denied, with the department asserting that real control and decision-making lay in the US and that the structure existed solely to avoid Indian tax.

In 2020, the Authority for Advance Rulings (AAR) sided with the tax department, holding that Tiger had sold shares of Flipkart’s Singapore holding company, not an Indian company, and that the treaty was never intended to exempt such transactions.

Tiger Global challenged the ruling before the Delhi High Court, which in August 2024 overturned the AAR’s decision, saying the use of a tax-efficient jurisdiction does not automatically amount to tax evasion and that the Mauritius entities could not be dismissed without full examination.

The tax department appealed, and the Supreme Court stayed the High Court order in January 2025. On Thursday, the top court finally settled the matter in favour of the revenue authorities.

Before the Supreme Court, Tiger argued that its Mauritius firms were genuine residents supported by valid tax residency certificates, that the investments were protected by grandfathering, and that board-level decisions were taken in Mauritius. The tax department countered that the structure was a façade, that a residency certificate is not a “magic pass”, and that the real “head and brain” of the business was in the US.