Tiger Global vs. India: SC Denies Relief, but CBDT Amends GAAR | What Investors Need to Know

Tiger Global is a New York-based investment firm. Its India investments were held through three Mauritius-incorporated companies: Tiger Global International II Holdings, III Holdings, and IV Holdings (the MauritiusCos). All three held Category I Global Business Licences (GBL-I), were regulated by the Mauritius Financial Services Commission (FSC), and maintained bank accounts, accounting records, office premises, and two employees in Mauritius. Each board had three directors: two Mauritius residents and one US resident. Each entity held a valid Tax Residency Certificate (TRC) from the Mauritius Revenue Authority.

The MauritiusCos engaged Tiger Global Management LLC (TGM), a US company, to provide investment management services. The AAR found that real control over transactions above USD 2,50,000 was vested with Mr. Charles P. Coleman, the beneficial owner of the entire group. Mr. Coleman was the authorised bank signatory beyond that threshold and directed decisions through non-resident director Mr. Steven Boyd. He was also the sole director of the ultimate holding companies in the group.

Between October 2011 and April 2015, the MauritiusCos acquired shares in Flipkart Private Limited (Singapore), whose value was derived substantially from Indian operating companies.

In May 2018, the MauritiusCos sold their Flipkart Singapore shares to Fit Holdings S.A.R.L. (Luxembourg), as part of Walmart International Holdings Inc.’s acquisition. The Share Purchase Agreement named Walmart International Holdings Inc. as purchaser and Fortis Advisors LLC as sellers’ representative. The Board approved the sale on 4 May 2018 and the transaction closed after 1 April 2017. The MauritiusCos sought nil withholding certificates. The Revenue refused, prescribed withholding rates of 6.05%, 6.92%, and 8.47% (certificates dated 17 August 2018), and withheld Rs 967.52 crore at source. The MauritiusCos filed applications before the AAR, which rejected them on 26 March 2020 on the prima facie tax avoidance ground. The Delhi HC overturned this on 28 August 2024. The Supreme Court restored the AAR’s ruling on 15 January 2026.

1. India–Mauritius DTAA and Article 13

The DTAA was signed on 24 August 1982. Under Article 13(4), gains from alienation of property not covered in Articles 13(1)–(3) are taxable only in the State of residence of the seller. Since Mauritius charged no capital gains tax, investors in Mauritius paid nothing on Indian gains. CBDT Circular No. 682 (1994) and Circular No. 789 (2000) treated TRCs as conclusive proof of Mauritius residency. The Supreme Court upheld this in Azadi Bachao Andolan (2004).

2. The 2016 Protocol and Article 13(3A)

India and Mauritius amended the DTAA by Protocol on 10 May 2016. From 1 April 2017, India gained the right to tax capital gains on direct transfers of shares in Indian companies. Article 13(3A) grandfathered investments made before 1 April 2017. The LOB clause (Article 27A) bars shell companies from treaty benefits but, as confirmed at paragraph 45 of the judgment, applies only to Article 13(3B) transactions, not to the residuary Article 13(4).

3. Section 9(1)(i) and Indirect Transfer

The Finance Act, 2012 inserted Explanation 5 to Section 9(1)(i), taxing gains from transfer of foreign shares in India if those shares derive their value substantially from Indian assets. Singapore Co.’s value came entirely from Indian operations. This established domestic taxability at the threshold, before any DTAA question arose.

4. GAAR, Rule 10U, and Section 90(2A)

Chapter X-A (GAAR) came into force on 1 April 2017. Section 90(2A) provides that GAAR overrides DTAA benefits. Rule 10U(1)(d) protected investments made before 1 April 2017 from GAAR. Rule 10U(2) provided that GAAR applies to any arrangement yielding a tax benefit on or after 1 April 2017, regardless of when entered into. The court read Rule 10U(2) as diluting the grandfathering in Rule 10U(1)(d). CBDT addressed this by Notifications 54 and 55 of 31 March 2026, discussed below.

Justice Mahadevan authored the main 133-page judgment. The court framed a single core issue: whether the AAR was right in rejecting applications at the prima facie threshold under Section 245R(2) proviso (iii). The court answered yes, for six reasons.

Finding 1: Domestic Taxability Is Established

Explanation 5 to Section 9(1)(i) covers transfers of foreign shares that derive value substantially from Indian assets. Singapore Co.’s value came from Indian operations. India’s right to tax was established at the threshold. This was not seriously disputed.

Finding 2: A TRC Is Necessary but Not Sufficient

Section 90(4) describes a TRC as an “eligibility condition,” not as “sufficient” evidence. At paragraph 37 of the judgment, the court held the TRC was non-decisive, ambiguous, and ambulatory, recording only futuristic assertions without independent verification. CBDT Circulars No. 682 and No. 789 operate within their pre-amendment regime only. Once the Revenue raises prima facie evidence of a tax avoidance arrangement, the TRC does not close the inquiry. The court also confirmed a new requirement: to claim exemption under Article 13(4), a taxpayer must prove the transaction is actually taxable in the treaty state, not merely that the entity is liable to tax there.

Finding 3: Article 13(3A) Does Not Cover Indirect Transfers

Article 13(3A) applies to direct transfers of shares of companies in a Contracting State. The MauritiusCos sold shares in Singapore Co., not in an Indian company. That sale falls under the residuary Article 13(4). There is no grandfathering protection under Article 13(3A) for indirect transfers. The LOB clause does not apply to Article 13(4) transactions (confirmed at paragraph 45 of the judgment).

Finding 4: GAAR Applies to Post-2017 Tax Benefits Regardless of Investment Date

Rule 10U(2) provides Chapter X-A applies to arrangements yielding a tax benefit on or after 1 April 2017, without prejudice to Rule 10U(1)(d). The court held this dilutes the grandfathering under Rule 10U(1)(d). The 2018 exit produced a tax benefit after 1 April 2017. GAAR therefore applied.

Finding 5: JAAR Continues Alongside GAAR

At paragraph 48, the court confirmed that Judicial Anti-Avoidance Rules (JAAR), grounded in substance over form and recognised in McDowell and Vodafone, operate in parallel with GAAR. Even where GAAR cannot be invoked, JAAR empowers courts and authorities to deny treaty benefits where a structure constitutes treaty abuse or involves a conduit. This finding is not affected by the CBDT amendment.

Finding 6: The AAR’s Prima Facie Threshold Ruling Is Restored

Section 245R(2) proviso (iii) requires the AAR to reject an application where the transaction is prima facie designed for tax avoidance. The standard is prima facie, not final determination on merits. The AAR’s factual findings were sufficient: effective management resided with Mr. Coleman in the USA, not in Mauritius; the MauritiusCos had no investment other than Flipkart Singapore shares; and the structure’s primary purpose was to access DTAA benefits. The Delhi HC erred in overturning this.

The Tiger Global judgment alarmed foreign investors globally. The court’s reading of Rule 10U(2) threatened legacy fund structures across PE and VC portfolios with pre-2017 India investments. The government responded on 31 March 2026.

What the Amendment Does

The amendment restores the government’s original grandfathering intent: pre-2017 investments remain outside GAAR on exit, regardless of exit date. This removes the GAAR overhang for PE and VC funds with legacy India portfolios and restores investor certainty. PwC’s Tushar Sachade described it as a pragmatic step. AKM Global’s Sandeep Sehgal called it largely clarificatory in nature that removes ambiguity around GAAR grandfathering.

What the Amendment Does Not Do

• JAAR continues to apply. Substance-over-form scrutiny remains available to the Revenue for pre-2017 investments. Structures lacking genuine commercial substance can still be challenged.
• TRCs remain insufficient on their own. The court’s holding that a TRC is necessary but not conclusive stands entirely unaffected.
• Tiger Global’s own liability is not reversed. The SC judgment rested on GAAR, JAAR, and the prima facie substance finding. Removing the GAAR leg does not eliminate the JAAR and substance legs.
• Article 13(3A) interpretation is unchanged. Indirect transfers through Singapore or other intermediary foreign companies receive no grandfathering protection. This reading stands.
• Indirect transfer taxability is unaffected. Section 9(1)(i) and Explanation 5 remain fully operative.

With the legal framework settled, the Income Tax Department is set to resume assessment proceedings for Assessment Year 2019–20. The Rs 967.52 crore withheld at source in 2018 will be adjusted against the final tax demand. The total liability including tax, interest, and penalties is estimated at approximately Rs 14,500 crore equivalent (USD 1.59 billion) based on independent analyst estimates. The exact figure will depend on the Revenue’s computation.

For Funds with Pre-2017 India Investments Yet to Exit

The CBDT amendment provides significant relief on the GAAR front. Pre-2017 investments are now explicitly protected from GAAR on exit regardless of exit date. However, the JAAR risk remains. If the investment structure lacks genuine commercial substance, if effective management sits outside the treaty jurisdiction, or if the entity’s sole purpose is DTAA access, the Revenue can still challenge treaty benefits under JAAR. The practical test remains substance.

For New Investment Structures (Post-1 April 2017)

Investments made on or after 1 April 2017 are not covered by the CBDT amendment’s carve-out. GAAR fully applies. The Tiger Global principles on TRC sufficiency, substance scrutiny, and JAAR remain fully operative for all post-2017 investments.

For the India–Mauritius DTAA Broadly

Pre-2017 investments are now GAAR-protected but JAAR-exposed. Post-2017 investments face both GAAR and JAAR. Direct transfers of Indian shares retain Article 13(3A) grandfathering for pre-2017 investments. Indirect transfers of shares in intermediary foreign companies remain outside Article 13(3A) and taxable under Section 9(1)(i).

Justice Pardiwala’s separate concurring opinion spans pages 134 to 152 of the judgment. He focused on tax sovereignty as a dimension of national economic security and laid out 12 safeguards India should insist upon in future international tax treaties.

This article is for informational and educational purposes only. It does not constitute legal or tax advice. All facts, figures, case citations, and legal analysis are based directly on the Supreme Court’s judgment in 2026 dated 15 January 2026, and on CBDT Notifications No. 54/2026 and No. 55/2026 dated 31 March 2026. Readers should consult a qualified tax professional for advice specific to their circumstances. Updated as of June 2026.