Navigating the Tiger Global ruling and India’s tax landscape

The Supreme Court’s recent ruling in the Tiger Global case marks a significant development in India’s evolving jurisprudence on tax sovereignty and treaty abuse. The case concerns 3 investment holding companies, namely Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings (collectively, “Tiger Global”) which are incorporated and have tax residency in Mauritius.

The dispute arose in 2018 when Tiger Global’s Mauritius entities sold shares of a Singaporean based company, Flipkart, to a Luxembourg-based buyer. These Mauritian entities sought a tax exemption in India under the India–Mauritius Double Tax Avoidance Agreement (“DTAA”) on account of Flipkart holding Indian assets. However, the Income Tax Department alleged that the Mauritius entity was merely a conduit to avoid tax and raised a demand of ₹14,500 crores. Accordingly, the Authority for Advance Rulings (“AAR”), which is India’s quasi-judicial tax body, held that effective control and decision-making were exercised not in Mauritius, but by Tiger Global Management, LLC in the USA.

The AAR further held that Tiger Global’s management and control in Mauritius existed only on paper. It noted that Mr. Charles P. Coleman, a non-resident, had exclusive authority to approve and operate bank transactions exceeding USD 250,000 and exercised beneficial ownership over the Mauritius entities. On this basis, the AAR concluded that the entities were structured primarily to avail treaty benefits.

The AAR observed that Flipkart Pvt. Ltd. was a Singaporean company, and the Mauritius entities held shares in Flipkart Singapore rather than directly in the underlying Indian companies. In the absence of a direct investment link with India, the India–Mauritius DTAA was held inapplicable, and the claimed tax exemption was denied.

Since the transaction constituted an indirect transfer, it was taxable under the domestic law. According to the AAR, once the charge to tax is attracted under domestic law, the availability of treaty benefits becomes immaterial.

Relying on Vodafone and Azadi Bachao Andolan,  the Court affirmed that a valid Tax Residency Certificate (“TRC”) entitled the Mauritian entities to treaty benefits and protected them from double taxation. However, the Apex Court clarified that a TRC is merely a threshold requirement and not conclusive proof of eligibility, and that tax authorities may examine whether treaty benefits are being legitimately claimed. The Supreme Court further held that the High Court erred in treating the TRC as determinative based on pre-amendment precedents.

General Anti-Avoidance Rules (“GAAR”) is a regulatory framework for preventing tax evasion in India. While it was widely assumed that pre-April 2017 investments were fully grandfathered from GAAR, the Supreme Court has taken a contrary view. The 2016 amendment to the India–Mauritius DTAA altered the taxation of capital gains on the sale of Indian shares. Earlier, Article 13(4) granted exclusive taxing rights to Mauritius, exempting such gains from tax in India. The amendment introduced a grandfathering clause, protecting investments made prior to 1 April 2017 from Indian capital gains tax to preserve investor confidence. Applying the post-2016 framework, the Apex Court concluded that Tiger Global’s Mauritius entities were liable for capital gains tax on the Flipkart sale.

The Apex Court held that although the original investment date may be protected subject to conditions, GAAR can apply to exit transactions undertaken after 1 April 2017. What is scrutinised is the arrangement, not merely the initial investment. Thus, even if an investment was made in 2015 through a Mauritius entity, a sale in 2024 may still be examined under GAAR.

The Court further affirmed that established judicial anti-avoidance principles, including those from McDowell & Co. Ltd. v. CTO would continue to operate independently of GAAR. Accordingly, treaty benefits, and grandfathering cannot protect structures lacking genuine commercial substance, which acts as a deterrent to curb treaty abuse while maintaining investor confidence.

In this background, recently the Central Board of Direct Taxes (CBDT) has notified the Income Tax (Amendment) Rules, 2026. The Amendment clarifies that while GAAR applies to all arrangements but it shall not apply on tax benefits availed before April 1, 2017.

This clarification serves to reaffirm the prospective application of GAAR and ensures that tax positions legitimately assumed under the pre-existing legal framework are not disturbed retrospectively. Consequently, the amendment seeks to balance the anti-abuse objectives emphasized in the Tiger Global judgment with the need to preserve certainty and investor confidence in India’s tax regime.

In light of the Tiger Global judgment, treaty benefits may be denied where Mauritius entities are found to be mere conduits, with the real “head and brain” of the investment located elsewhere. Treaty protection depends on demonstrable substance in Mauritius. Key factors considered include whether: (a) effective decision-making occurs in Mauritius; (b) directors exercise independent judgment; (c) the entity has real personnel, premises, and commercial operations; and (d) genuine entrepreneurial risk is assumed at the Mauritian level.

Control and management must correspond with the entity’s claimed tax residence. In Tiger Global, the Supreme Court scrutinized factors such as US-based executives approving significant transactions, ultimate authority resting with non-resident directors, board decisions that appeared to be rubber-stamped, and bank account controls being exercised outside the claimed jurisdiction. The Court’s analysis indicates a shift from a form-based test to a purpose-and-substance based analysis. The existence of a valid legal structure and a TRC alone may not be determinative. The applicability of treaty benefits is assessed with reference to real economic substance, genuine business purpose, and effective decision-making within the claimed country of residence.

Investors may begin by conducting an immediate substance audit of India-facing holding entities in light of the Tiger Global ruling. This audit must address several critical questions as to (a) where strategic decisions are actually taken, (b) who controls bank accounts and transaction approvals, (c) whether local directors exercise real authority or merely provide formal approval, and (d) whether operational expenses reflect genuine business activity. Supporting documentation including board minutes, internal memoranda, and investment committee papers should demonstrate independent commercial judgment rather than serve as post-facto tax justification.

For new structures, substance must be built in from scratch. This means appointing qualified local directors with substantial participation in governance, maintaining comprehensive records of board meetings, and establishing a genuine operational physical presence through inter alia office space or personnel. Most importantly, real decision-making authority must actually reside within the treaty jurisdiction, not merely on paper.

About the authors: Anusha Mohapatra is a Senior Associate, Asmita Singh and Dhruvi Ved are Associates at Vector Legal.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.