India's Supreme Court has ruled against Tiger Global in a tax case stemming from Flipkart's exit from Walmart in 2018. The ruling strengthens New Delhi's ability to challenge offshore treaty structures and could increase tax risks for global funds looking for a predictable exit 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 can use its Mauritius-based entity to claim 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 judgment set aside a 2024 Delhi High Court judgment that overturned a 2020 order by an advance ruling authority that found the company had prima facie evaded tax and therefore was not eligible for treaty relief.
The ruling has attracted attention from investors as it strengthens India's efforts to counter offshore “treaty routing” structures long used to reduce taxes on high-value exports. It could also increase uncertainty about how future cross-border transactions will be structured and priced, as foreign funds look to India as a key growth market.
In its judgment, the two-judge bench said that India's advance ruling mechanism cannot be used to seek protection in cases where, on its face, the transaction appears to be designed to avoid income tax (PDF).
Tiger Global initially invested $9 million in Indian e-commerce company Flipkart in 2009 and has since increased its exposure to approximately $1.2 billion through multiple funding rounds, TechCrunch previously reported. The company later sold its stake to Walmart in 2018 for about $1.4 billion.
The tax dispute centers on how Tiger Global structured its investments through Mauritian entities and whether these vehicles can claim protection under the India-Mauritius tax treaty to shield capital gains from Indian taxes.
In selling its Flipkart stake during its $16 billion deal with Walmart, Tiger Global sought a certificate disallowing withholding, arguing that because the shares were acquired before April 1, 2017, the profits were exempt from Indian capital gains tax under the “grandfather clause” in the Indo-Mauritius double tax avoidance agreement that protects old investments from new tax regimes. Indian tax authorities rejected the request in 2020, questioning the offshore structure chosen by the investment company.
The Supreme Court bench framed the controversy as a question of the sovereign's taxing power and cautioned against structures aimed primarily at weakening that power.
“It is a state's inherent sovereign right to tax income derived from its own country,” the court said, adding that “the dilution of this power through artificial arrangements is a direct threat to its sovereignty and long-term national interests.”
Ajay Lotti, a tax expert and founder and CEO of tax advisory firm Tax Compass, wrote in X that the ruling should be read as a warning against aggressive tax planning rather than a wholesale dismantling of the Indo-Mauritius treaty framework. He said the judgment reinforces a broader move towards “substance over form” and suggests that treaty protections may not automatically apply where offshore entities are not carrying out actual commercial activities.
Tiger Global did not respond to a request for comment.
The company can ask for a review of the verdict, but such petitions are rarely granted.