The apex court held that capital gains arising from Tiger Global’s sale of its Flipkart stake to Walmart are taxable in India, rejecting the fund’s claim for exemption under the India–Mauritius tax treaty. The ruling comes as a significant victory for the Income Tax department and could have far-reaching implications for foreign investors who routed investments into India through Mauritius.
Tiger Global’s Flipkart Exit Under Lens
Tiger Global had exited Flipkart in 2018, selling its stake to Walmart for about $1.8 billion. The private equity firm had made its investment through a Mauritius-based entity and claimed exemption from capital gains tax under the India–Mauritius DTAA.
The tax department, however, challenged this structure, arguing that the Mauritius route was used primarily to avoid tax in India. While Tiger Global initially lost before the Authority for Advance Rulings (AAR), it later secured relief from the Delhi High Court, which ruled in its favour.
The matter eventually reached the Supreme Court.
Supreme Court: Mauritius Route a Tax Avoidance Scheme
In a sharply worded judgment, the Supreme Court overturned the Delhi High Court ruling and sided with the tax department. The court said the transaction structure adopted by Tiger Global amounted to treaty shopping and tax avoidance.
The apex court ruled that the tax benefits under the India–Mauritius tax treaty “shall not be available” to Tiger Global and that gains from the Flipkart transaction are taxable in India.
Significantly, the court observed that taxing income arising within a country is a sovereign right and warned that surrendering such rights could pose a threat to a nation’s economic sovereignty.
“It would be prudent for a country to retain its taxing power,” the court noted, underscoring the importance of protecting domestic tax revenues.
Big Win for Tax Department, Big Setback for Investors
The ruling is expected to translate into a tax demand of at least ₹14,500 crore on Tiger Global, potentially higher once interest and penalties are factored in.
For the Income Tax department, the judgment provides strong judicial backing in cases involving treaty shopping and aggressive tax planning. Tax experts say the verdict arms authorities with a powerful precedent to challenge similar structures used by foreign investors.
However, the decision has sent ripples across India’s private equity and venture capital ecosystem.
Wider Impact on PE, VC and FPI Exits
Beyond Tiger Global, the ruling raises concerns for a wide range of foreign investors—private equity funds, venture capital firms and foreign portfolio investors—who invested in Indian companies via Mauritius and are now awaiting exits.
Tax experts warn that such investors could now face substantial capital gains tax demands when they exit their investments. There are also fears that even transactions that have already been completed could come under renewed scrutiny by tax authorities in light of the Supreme Court’s observations.
The judgment could also influence how global funds structure future investments into India, potentially accelerating a shift away from Mauritius-based holding structures.
What Lies Ahead
While the ruling delivers a decisive win for the tax department, it also reopens the debate on tax certainty and investor confidence in India. Market participants will be closely watching how aggressively tax authorities apply the Supreme Court’s findings to other cases.
For now, the verdict marks a turning point in India’s long-running battle against treaty shopping—and a costly setback for one of the world’s most prominent private equity investors.